That's a big owwee, but $30 was bit frothy for a company with revenues of only $11 million. PWRD hit its high just two days after debuting publicy on Thursday. IPO craze? Bubble market? Perhaps a bit of both. But as Kevin Kelleher writes at TheStreet.com, the Co is in the black for the first time and margins are eye-popping.
When I wrote about Perfect World after its debut last week, I couldn't help but notice the sweet artwork from its video game (also called Perfect World) in its SEC filing. The game is produced for the Chinese market, which means it hasn't been exposed to the rest of the world much. That could change soon because the Co now has a market cap of $3.9 billion. Kelleher notes that Perfect World is investing a ton into R&D, which is par for the course with video-game companies. But consider this: Shanda Interactive (SNDA) doesn't spend its cash on R&D, but instead lets other companies do the spending. Then Shanda licenses games that are on track to become successful. It's like having a rancher raise the bulls and cows, then someone else comes in and pays only for the best, most productive ones.
A devotee of the Perfect World game would hold shares through the coming volatility and unpredictablity, but until PWRD proves it can produce more winners, Shanda has the more effective business model.
Pupule Paul has no positions in these stocks.
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