Why Sohu Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese Internet portal Sohu.com (Nasdaq: SOHU  ) surged 16% on Monday after its quarterly results topped Wall Street expectations.

So what: Sohu shares have been crushed in recent months on concerns over slowing growth, but a second-quarter beat -- adjusted EPS of $0.42 on revenue of $256 million versus the consensus of $0.39 and $248.1 million -- eases some of those fears. In fact, Sohu's online gaming unit Changyou.com (Nasdaq: CYOU  ) also surged today on better-than-expected revenue, reinforcing optimism over a prolonged turnaround.

Now what: For the third quarter, management now sees adjusted EPS of $0.50-$0.55 on revenue of $272 million-$277 million, versus the consensus of $0.60 and $273.7 million, respectively. "The year 2012 is a critical year of transition for the Sohu Group," Co-President and COO Belinda Wang said in a statement. "As we continue to make heavy but necessary investments across our strategically important business lines, we are confident to see a payoff in 2013." With Sohu still off more than 50% from its 52-week highs and trading at a forward P/E of 11, betting on that bullishness might not be a bad idea.

Interested in more info on Sohu? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Sohu. Try any of our Foolish newsletter services free for 30 days.

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