This Stock Might Become a Giant in 2013, Don’t Miss It

Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As I look back at 2012, I see that one of my better stock picks was a little known stock that traded under $5 when I first looked at it. A 52-week return of almost 32% along with a terrific dividend yield of 5.6% had each and every Giant Interactive (NYSE: GA) investor smiling in 2012, while resulting in higher expectations for the New Year at the same time.

Giant consistently improved its revenue and earnings during the course of 2012, it worked towards making its games more addictive, and has a strong pipeline going forward. All these positives reflected in the stock price in 2012, and there is every reason to expect another strong performance in 2013.

Growing Smartly

Firstly, Giant’s games have been doing really well. One can gauge this fact by taking a look at the 7.4% jump in active paying accounts that the company recorded last quarter. This has been made possible by the success of its games, most notably the ZT Online franchise. Giant’s ZT Online can be compared to Activision Blizzard’s (NASDAQ: ATVI) World of Warcraft, a seven year old franchise that generates close to 30% of its revenue.

Activision has kept WoW alive over the years through expansion packs and this has kept players engaged, a fact proved by the spike in subscriber count after the release of Mists of Pandaria. Similarly, Giant Interactive is also trying to convert ZT Online into a legacy game which can generate revenue for years to come.

Also, Giant Interactive is looking to deliver its next blockbuster gaming title in the form of World of Xianxia. The company has received good feedback from initial testing of the game and I won’t be surprised if it hits gold with World of Xianxia, given the “game’s unique blend of hardcore MMO game play with social and team-based objectives plus a vivid 3D graphics in the words of CFO Jazy Zhang.

Expanding Formats

Apart from this, there are a number of other games in different formats that should help Giant keep up its growth. The company is pushing into micro-client games and webgames, which have emerged as the hottest gaming trends in China. Webgames would be a new category into which Giant is going to push into in 2013 by launching Genesis of the Empire and The Sky in the first quarter.

And then, there are micro-client games. Giant has smartly introduced its strongest franchise, ZT Online, in micro-client format which enables players to download a small file and play the game. In addition, Elsword and Allods Online have also done well in their micro-client avatars, and this has led Giant to focus more on micro-client games in 2013.

Moreover, the company has partnered with Qihoo 360 (NYSE: QIHU) for running the micro-client version of ZT Online 2, and this seems to have worked positively. Qihoo 360’s big user base and secure platform can further help Giant’s games, and this is the reason why Giant has elected to operate World of Xianxia on this platform. Moreover, Qihoo 360 has been expanding its services across various applications such as search, map search and music services, and this could further enhance its user base and bodes well for Giant.  

The Bottom Line

With a solid pipeline of games, expansion into growing platforms, and an increasing player base, Giant Interactive can once again recreate the previous year’s performance in the New Year. It is making smart moves to tap the huge opportunity in the Chinese online gaming market and keep up its rate of growth. Moreover, a cheap trailing P/E of almost 7 and a juicy dividend yield of 5.6% complement the other reasons why you should consider buying this potential outperformer for your portfolio. 


TechJunk13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Activision Blizzard. Motley Fool newsletter services recommend Activision Blizzard and Giant Interactive Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure