Monday, October 27, 2008

Sohu.com (SOHU) Quadruples Profit, Raises Guidance, Announces Share Buyback ... and gets a 4% Pop

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Sohu.com (SOHU) is the perfect example of the stock market today. They did a triple play today - beat on earnings, raised guidance and to top it off announced a $150M share buyback or just under 10% of their market cap. For all that we are seeing just over a 4% gain. That's laughable. If you miss in this market or lower guidance you can drop 30-40% in a heartbeat. If you do everything right you can gain 4%. That folks is the definition of risk/reward not in your favor.

We sold the last of our Sohu.com on Sept 9th in the $65s; it is now in the mid $40s - another "round trip" in the making. If fundamentals meant anything I'd be a buyer here, but there is no point when any news only matters for a few hours before a stock is sold off.


Earnings
  • Sohu.com Inc., a Chinese Web portal, said Monday that its third-quarter earnings spiked as the company benefited from increased Internet use in China following the 2008 Olympics in Beijing. For the quarter ended Sept. 30, earnings more than quadrupled to $40.3 million, or $1.02 per share, from $9.7 million, or 25 cents per share, a year ago. Excluding special items, earnings totaled $42.8 million, or $1.08 per share, compared with $11.7 million, or 30 cents per share, in the prior year.
  • Quarterly revenue more than doubled to $120.7 million from $51.5 million in the third quarter of 2007.
  • Analysts polled by Thomson Reuters, who generally exclude one-time items, forecast third-quarter earnings of 95 cents per share on revenue of $114.7 million.
  • Sohu said its advertising revenue jumped 62 percent over the third quarter of 2007. The company's online game revenue more than quadrupled to $54.6 million, driven by the company's massive multiplayer online game Tian Long Ba Bu. Wireless revenue more than doubled to $14.5 million.
Guidance
  • Sohu.com Inc., a Chinese Web portal, forecast fourth-quarter earnings well above Wall Street's expectations on Monday, after reporting that its third-quarter earnings spiked. Sohu expects earnings per share to range from $1.20 to $1.25 in the fourth quarter and for revenue to fall between $118 million and $122 million. Analysts polled by Thomson Reuters forecast quarterly earnings of $1.08 per share on revenue of $116.5 million, on average.
Share Buyback
  • Sohu.com Inc., a Chinese Web portal, said Monday its board has authorized a stock buyback program of up to $150 million through the end of 2009, after reporting strong third-quarter earnings growth.
  • "The strength of Sohu's strong balance sheet and operating cash flow allows us to take advantage of opportunities surrounding the volatility in U.S. equity markets to repurchase stock and add value to Sohu's shareholders," said Chief Executive Charles Zhang.
Can't ask for much more than this; but in this market it simply does not matter if your investment time frame is anything longer than 6 hours.

No position

[Jul 28: Sohu.com - Another Hit Earnings and Gaming Unit IPO Spinoff]
[June 23: Sohu.com - Analysts Rush to it's Defense]
[Jun 20: Sohu.com Sees Ad Revenue Slowing in 2009]
[Feb 5: Initiating Sohu.com Starter Position]
[Feb 4: Sohu.com Also Impressive]

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