Piper Jaffray Sees 20% Upside In Perfect World (PWRD)

Oppenheimer & Co. has an Overweight rating and a $37 price target on shares of Perfect World Co., Ltd. (ADR) PWRD going into earnings being released this week. In a research note sent to clients, Oppenheimer writes, "strong seasonal performance of FWJ. PWRD may disappoint due to competition from the launch of the Wrath of the Lich King (WLK) expansion for World of Warcraft (WoW), operated by NTES, yet we remain constructive on PWRD shares due to strong performance of Forsaken World, according to our checks. " Oppenheimer goes on to say, "Due to delay of game launches until October, as well as margin pressure from the lower margin Japanese operation, we believe there may also be some downside to our 3Q EPS of $0.13, in-line with consensus. However, we maintain our OW rating on PWRD shares due to the strong performance of Forsaken World in open beta. As a result of WLK launch, PWRD did not release any new games in 3Q, instead delaying them until late October. As both PWRD and WoW have large user overlap due to PWRD's concentration of 3D games, near term user loss to WoW may exceed our expectation. Our 3Q revenue estimate is $91.2M, up 4.1% QoQ, including 1.3% from Rmb appreciation, versus company's guidance of 0%-5% QoQ growth." Shares of PWRD lost 44 cents on Friday to close at $31.01, a loss of 1.4%.