UPDATE: Deutsche Bank Downgrades NetEase in Light of a Projected Painful Transition

In a report published Thursday, Deutsche Bank analyst Vivian Hao downgraded NetEase (NASDAQ: NTSE) from a Buy rating to a Hold rating and lowered the price target from $73.00 to $66.00.

In the report, Deutsch Bank says "NetEase recorded 3Q total gross revenues of Rmb2.5b (+4%QoQ/23%YoY), broadly in-line with our estimate and 5% higher than the Street's. Gross gaming revenue came in at Rmb2.1b (+1.9%QoQ/+21%YoY) and in-line with our forecast while ad revenues (Rmb299m) were 5% short of our estimate. Wireless and others (Rmb110m) was 22% above our estimate mainly due to a pickup in game accessories sales. As a result, non-GAAP EPADS of US$1.42 was 8%/1% below our/consensus estimates. We believe NetEase is likely to go through a painful transitional period from PC game incumbent to mobile internet with limited catalyst currently; downgrading to Hold."

NetEase closed on Wednesday at $69.41.