What happened
Shares of Chinese internet company Sohu.com (SOHU +0.38%) rose on Tuesday, despite no company-specific news. The stock tumbled on August 5 after the company's second-quarter report missed expectations, so Tuesday's rally may have been driven by investors scooping up beaten-down shares. News that the U.S. would delay tariffs on certain Chinese goods may also have been a factor. Sohu stock was up about 10.5% at market close.
So what
Sohu reported a small revenue decline in the second quarter, a bit worse than analysts were expecting. And while adjusted earnings per share was flat, it was well below the average analyst estimate.
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On top of missing estimates, Sohu's third-quarter revenue guidance came up short. The company sees revenue between $445 million and $470 million, compared to analyst expectations of $499 million.
That weak second-quarter report sent shares of Sohu plunging more than 25% on August 5. The stock has made up some lost ground since then; after Tuesday's rally, the stock is now less than 14% below its pre-earnings level.
Possibly driving up shares of Sohu was an easing of the trade war between the U.S. and China on Tuesday. The U.S. decided to delay a new 10% tariff on certain categories of products, including some electronics.
Now what
While Sohu stock has recovered some of its post-earnings losses, shares are still more than 50% below their 52-week high. Positive trade war developments could help drive up the stock in the short term, but that might not matter in the longer term if the company continues to miss expectations.
