Sohu Is Good to Go for the Long Run     

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Chinese online media company (Nasdaq: SOHU  ) came out with decent results in the fourth quarter. However, its low first-quarter forecast -- in the range of $219 million to $225 million, which is below analyst expectations of $238.2 million -- brought the stock down by more than 15%.

Although the Street may not be in Sohu's favor right now, this just may not be reason enough for you to write off the company yet.

Reasons to be positive
Sohu's net income declined by almost 40%, but this was due to a one-time impairment charge on its previous acquisitions. Without this one-time cost, net income in the fourth quarter rose by 24% to $54.3 million.

China has significant market potential with increasing number of Internet users, which has recently exceeded the 500-million mark. With Google yet to gain a strong foothold there, Sohu -- along with Baidu (Nasdaq: BIDU  ) which has a market share of 78.3% -- has plenty of room for growth. At the same time, growing adoption of the company's Sogou browser resulted in an amazing 248% increase in revenue from the segment on a comparable-year basis.

Exploiting opportunities
Sohu's efforts to grow its business have obviously paid off well. In the previous year, it acquired licenses for 400 movie titles from News Corp.'s 20th Century Fox. Sohu has also been profiting from its online gaming division, Changyou (Nasdaq: CYOU  ) , due to the popularity of MMO games such as Tian Long Ba Bu and DDTank, the latter being one of the top-ranking Web-based games in China. Its gaming division recorded a 33% rise in revenue for the full year to $435 million.

The Foolish bottom line
While China's economy is slowing down, Sohu's still projected to grow by about 8.1% this year compared with 9.2% in 2011. I don't think 8.1% is that bad.

So, Sohu's revenues might take a hit in the near term, but the secular rise in online advertising powered by the growing number of people going online would ensure future growth for the company. Sohu should make it in the long run.

So, don't forget to stay up to speed with the latest on Sohu's performance by adding it to your watchlist. It's free and lets you stay on top of the latest news and analysis for your favorite companies.

Fool contributor Keki Fatakia does not hold shares in any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of and Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1779836, ~/Articles/ArticleHandler.aspx, 10/21/2016 9:50:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 34 minutes ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
SOHU $42.51 Up +0.60 +1.43% CAPS Rating: ***
BIDU $176.76 Up +1.59 +0.91%
Baidu CAPS Rating: *****
CYOU $27.56 Up +0.26 +0.95% CAPS Rating: **