Earnings Preview: Sohu.com - Analyst Blog
03 Fevereiro 2012 - 1:34PM
Zacks
Sohu.com Inc. (SOHU) is set to report its
fourth quarter and full-year 2011 results on February 6, 2012,
before the market opens. Sohu reported a mixed third quarter, as
the company missed the Zacks Consensus estimates by a penny,
despite beating revenues handily.
Sohu’s third quarter earnings increased 15.8% year over year to
$1.17 per share (including stock-based compensation) based on a
42.0% total revenue growth in the quarter. Despite the mixed
results, Sohu provided an upbeat fourth quarter guidance and
forecasted total revenue to be in the range of $241.0 million to
$246.0 million.
Sohu expects EPS in the range of $1.30 to $1.35. For further
details please see Sohu Misses on Higher Expenses.
Estimate Revision Trend
Currently, the Zacks Consensus Estimate for the fourth quarter
is pegged at $1.23, up 15.0% from $1.07 reported in the year-ago
quarter. This is based on an estimated revenue growth of 40.5% year
over year to $243.0 million.
In the last 30 days, none of the nine analysts covering the
stock revised their estimates for the fourth quarter. We note that
Sohu has posted an average earnings surprise of 4.90% in the
trailing four quarters, implying that it has outdone the Zacks
Consensus Estimate by the same magnitude for the last four
quarters. We don’t expect a major change in the earnings trend
pattern for the current quarter.
Our Recommendation
According to a latest report from China Internet Network
Information Center (CNNIC), the number of Internet surfers in China
reached approximately 513.1 million at the end of calendar year
2011. Strong user growth was noticed in the search and online video
market over the last twelve months. This trend bodes well for Sohu
going forward, as the company continues to increase its investments
in search and online video.
As per the latest data from market research firm Analysys
International, Sohu Video had 13.3% of China's online video market
at the end of fourth quarter of calendar 2011; lagging #2 placed
Tudou Holdings Ltd. (TUDO) by just 40 basis
points. We believe that ongoing content additions (domestic, as
well as American television dramas) will boost Sohu’s online video
market share going forward.
In the third quarter, Sohu entered into a partnership with MSN
China to build an exclusive online video platform for MSN, solely
operated by Sohu video. Management believes this to be an exciting
opportunity for Sohu as it will increase its traffic and
monetization growth due to the comparative affluence of the MSN
users. We believe that the partnership will help Sohu to faster
penetrate the online video market in the near term.
Sogou continues to gain market share due to the popularity of
its browser, which drove maximum traffic on the search engine in
the recent past. We believe that Sogou is also benefiting from the
pre-mature withdrawal of Google Inc. (GOOG) from
China as erstwhile Google users are now shifting to Sogou rather
than to Baidu Inc. (BIDU).This is expected to
further boost Sohu’s market share going forward.
Sohu is also expected to benefit from its strength in online
games. We believe that Sohu’s promising games portfolio and the
growing popularity of Changyou’s games will drive profitability
over the long term. Sohu has a solid game pipeline including
Battlefield Online and a couple of massively multiplayer online
games (MMO) which will further boost its top-line growth going
forward.
However, higher operating costs due to continued investments in
video may hurt profitability in the near term. Moreover, cut-throat
competition and increasing government scrutiny into Chinese
Internet usage may also hurt Sohu’s growth over the long term. We,
therefore, maintain our Neutral recommendation on the stock over
the long term.
We note that the stock has appreciated approximately 18.0% over
the last one month compared to a 3.8% increase in the S&P 500.
Considering Sohu’s growth opportunities in the near term, we
believe that the shares are undervalued. Currently, Sohu has a
Zacks #1 Rank, which implies a short-term Strong Buy rating.
BAIDU INC (BIDU): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
SOHU.COM INC (SOHU): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Tudou Holdings Limited ADS (MM) (NASDAQ:TUDO)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
Tudou Holdings Limited ADS (MM) (NASDAQ:TUDO)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024