11:53 AM EDT, 04/02/2024 (MT Newswires) -- NetEase's ( NTES ) game revenue growth estimates for 2023-2025 have been cut by Morgan Stanley to a 10% compound annual growth rate from 14% as its new game "Condor Heroes" missed expectations and the company adjusted the PC version of "Fantasy Westward Journey," the investment firm said in a note on Tuesday.

Morgan Stanley also cut the company's price target to $135 from $150, while keeping the overweight rating.

Condor Heroes is "one of NetEase's ( NTES ) top three open-world [massively multiplayer online role-playing game] IPs in recent years, along with Justice Mobile and Where Winds Meet, yet, it was not developed by NetEase's ( NTES ) first-class studios, hence, we think the disappointment is one-off," the note said.

The investment firm cut the game's first-year grossing estimates to 1 billion yuan to 2 billion yuan ($138 million to $276 million) from 4 billion yuan, citing the game's "iOS grossing ranking of #29 on April 1."

Also, the adjustments made to the PC version of NetEase's ( NTES ) "Fantasy Westward Journey" to improve users' experience may lead to a drop in revenue, Morgan Stanley said.

"We are uncertain about the magnitude and duration of the impact and estimate a 5% cut to NetEase's ( NTES ) overall PC game revenue in 2Q24 which will recover after," the note said. "The game was adjusted for gamers' complaints about over-monetization, unbalanced gamer economics, and values of certain in-game items, etc, that has been ongoing since 2023."

"Given the game's two decades of operation as one of the most iconic [massively multiplayer online role-playing games] in China's history, we expect the impact to be temporary," the investment firm said.

Meanwhile, Morgan Stanley expects "Naraka Mobile" and "Where Winds Meet" in the next two to four months to "reaccelerate growth" for the company.

Price: 97.52, Change: -1.19, Percent Change: -1.21