Why Sohu.com Shares Dropped Today

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 gaming and search company Sohu.com (NASDAQ: SOHU  ) fell 16% today after the company reported earnings.

So what: Third-quarter revenue rose 29% to $368 million and net income dropped 23% to $41.1 million. After accounting for net income to non-controlling shareholders, the company actually lost $64.2 million, or $1.69 per share.  

Now what: The one surprising number was an expectation of a 0%-4% decline in brand advertising revenue. Organic growth just doesn't appear to be as strong as the top-line numbers seem, and with another loss of $0.30-$0.35 per share expected again next quarter, I just don't see this as a buying opportunity. I'll sit out this move because I'm just not willing to speculate on a Chinese gaming company making a profit.

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