Shanda Games: Strong Product Pipeline Driving Growth in 2011

Xiaofan Zhang submits:

On March 1, Shanda Games (GAME), a subsidiary of Shanda Interactive Entertainment (SNDA), reported strong 4Q10 results and 1Q11 guidance: Total revenue of $174 million beat Wall Street consensus of $168.8 by 3.1%. GAAP EPS of $0.20 was 17.6% above consensus of $0.17. While investors were pleasantly surprised at the Q4 results, the brightest spot in Shanda's Q4 earnings call was the better-than-expected Q1 guidance: Shanda guided 5%-7% sequential revenue growth in 1Q11, which translated into $182.7-$186.2 million, whose midpoint was 6.1% above consensus of $173.9 million.

Shanda shares surged 18.8% on the first trading day after Q4 earnings release. I believe the major driver of such enthusiasm is Shanda's strong product pipeline for 2011: For 1Q11, Dragon Nest, Maplestory 2.0, and Hades Realm II will be major growth drivers. From 2Q11 to 4Q11, quality games Legend of Immortals, Bubble Fighter, Sudden Attack, Point Blank will help sustain the growth.


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