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Why Shares of Surged Again Today

By Timothy Green – Apr 30, 2019 at 5:11PM

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A solid earnings report has led to two days of gains.

What happened

Shares of (SOHU 1.69%) rose on Tuesday, the second day of gains following the Chinese Internet company's first-quarter results. Sohu beat analyst estimates for both revenue and earnings, and it provided guidance that was ahead of expectations. The stock was up 11.9% at market close.

So what

Sohu reported first-quarter revenue of $431 million, down 5% year over year but about $26 million above the average analyst estimate. Brand advertising revenue slumped 24% year over year to $43 million; search and search related advertising revenue rose 6% year over year to $234 million; and online game revenue declined 6% year over year to $99 million. On a constant-currency basis, total revenue would have increased by about 1% year over year.

A rising stock chart.

Image source: Getty Images.

Non-GAAP earnings per American depositary share (ADS) came in at a loss of $1.39, up from a loss of $1.50 in the prior-year period and $0.08 higher than analysts were expecting. Gross margin declined by 3 percentage points from the prior-year period to 40%.

Sohu CEO Charles Zhang discussed the progress the company made during the quarter: "Sohu Media continued to make progress upgrading its products and content on our platform and we explored new ways to diversify revenue sources. Sohu Video consistently offered appealing self-developed dramas and its financial loss continued to narrow due to strict cost controls."

Now what

Sohu expects to generate between $469 million and $494 million of revenue in the second quarter. Brand advertising revenue is expected between $47 million and $52 million, down 15% to 24% year over year. Online game revenue is expected between $90 million and $100 million, down 5% to up 6% year over year. Analysts were expecting revenue guidance of $459.8 million on average.

Non-GAAP net loss per ADS is expected between $0.95 and $1.20, well above of the loss of $1.54 analysts were expecting.

An earnings beat and solid guidance from Sohu was enough to propel the stock to two days of strong gains.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends The Motley Fool has a disclosure policy.

Stocks Mentioned Stock Quote
$15.05 (1.69%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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