Inc. Shares Sink on Weak Next-Quarter Guidance delivered a profit surprise in the fourth quarter, but 2014 looks like a money-losing year of transition. Investors punished the stock hard.

Feb 10, 2014 at 12:20PM
Sohu Logo

Source: (NASDAQ:SOHU) reported fourth-quarter results this morning, beating analyst estimates on the bottom line -- but missing Wall Street's revenue targets and setting soft goals for the next quarter.

The Chinese provider of online media and search services saw revenues jumping 29% year-over-year, landing at $385 million. Analysts were looking for $387 million.

Sohu shocked the Street when it comes to profitability, delivering $0.12 of positive non-GAAP earnings per share while Wall Street targets pointed to a $0.36 loss per share.

CEO Charles Zhang pinned this strong performance on mobile monetization and the rise of the Sogou search engine as a contender in the Chinese search market.

However, Sohu's outlook for the just-started 2014 fiscal year was less than rosy. CFO Carol Yu noted that "2014 will be a year of investment for the Sohu Group," and not necessarily a year of strong growth. A strong push into online video operations plus the development of several new game platforms will "unavoidably" limit Sohu's profits in 2014 in return for reinforcing "our long-term competitiveness in China's Internet industry."

Translating this cautious guidance language into numbers, Sohu put the midpoint of first-quarter sales guidance at $361 million and sketched out a non-GAAP net loss near $1.15 per share. Analysts were expecting a breakeven first quarter on roughly $379 million in sales.

Ignoring both the strong fourth-quarter profits and level-headed long-term vision, Sohu shares plunged as much as 9.1% on the gloomy near-term guidance.


Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends 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.

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