Monday, August 1, 2011 (SOHU) Hit Hard Despite Solid Earnings Report

An interesting situation between (SOHU) and Sina (SINA) the past few quarters.  Despite having far better financial growth and metrics, Sohu has lagged Sina because the latter owns Weibo.  Must be frustrating. 

This morning reported another excellent quarter of 36% revenue growth, and a Non GAAP EPS up 27% to $1.21.  Of course if your income is rising slower than your revenue, expenses are surging - in this case 43% on a non GAAP basis.  Doesn't seem to be a problem at (AMZN) which reports lower earnings year over year but still gets rewarded by investors for "growing at all costs".  Other companies are not as fortunate.
  • The increases in both GAAP and non-GAAP operating expenses were mainly due to increases in both headcount and average compensation and higher expenses associated with marketing activities in the second quarter of 2011.
Full report here.

Their 2 main business lines - gaming (51% of sales) and ads (34% of sales) both grew well, at 31% and 27% respectively.  Their search engine, Sogou, while less than 10% of sales is growing rapidly at 252% year over year growth.

Even with an increase in guidance for Q3, the stock - after opening flattish - is being bludgeoned, but is coming in nicely to support.   Generally companies who have nice earnings but are still punished are attractive purchases as they pull back to support (of course assuming the general market does not implode).

No position

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