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Sohu.com Inc. Shares Sink on Weak Next-Quarter Guidance

By Anders Bylund – Feb 10, 2014 at 12:20PM

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Sohu.com delivered a profit surprise in the fourth quarter, but 2014 looks like a money-losing year of transition. Investors punished the stock hard.

Source: Sohu.com.

Sohu.com (SOHU -1.96%) 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.

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