BofA Securities has raised its price target for NetEase (09999) from HK$268 to HK$272, while also increasing the US-listed NetEase (NTES) target from $172 to $174, reiterating a "Buy" rating on the stock.

The brokerage has lifted its adjusted operating profit forecasts for 2026 to 2028 by 7% to 9%, reflecting higher gross margins in the gaming segment. This revision follows the company's strong second-quarter results released on August 20, where total revenue grew 10% year-over-year, surpassing market expectations by 3%.

Adjusted operating profit on a reported basis surged 29% year-over-year, beating consensus estimates by 13%, driven by robust gaming margins and cost efficiencies in marketing. The firm continues to anticipate accelerated revenue and profit growth in the second half of the year.

BofA expressed limited concern over the recent revenue trend of the July-launched title Lost Sea, noting that classic games are stepping up to fill the gap. Titles such as Egg Party, Identity V, Light of the Ages, the major June update for Justice Online mobile, the July PC version of Justice Online, and the mobile edition of Fantasy Westward Journey (launched August 21) are all contributing positively.

For the upcoming title Infinite, the bank still expects annual gross billings of RMB 10 billion, with a launch targeted for the first quarter of 2027. Overall, BofA remains positive on NetEase, citing several favorable factors: 1) limited competitive risk from ByteDance; 2) potential upward revisions to future earnings forecasts; 3) attractive valuation (2026/2027 P/E of 13x/12x); and 4) a strong track record of shareholder returns coupled with ongoing southbound capital support (with holdings below 2%).