Like the Olympic torch as it inches closer to Beijing this summer, Sohu.com
The online media company came through with another monster quarter, even blowing past its upwardly revised guidance.
Revenue for the fourth quarter climbed 90% higher to $65.3 million. Earnings soared 144% to $0.39 a share, or $0.43 a share on a non-GAAP basis. Wall Street was looking for a profit of $0.31 a share on a mere $55.4 million in revenue.
The success of the company's in-house multiplayer game, Tian Long Ba Bu, helped fuel a tenfold advance in the company's online gaming business. Online gaming has become an important part of the Sohu story, now accounting for 37% of the revenue mix. That's a welcome development, given the chunky net margins that niche leaders like NetEase
Sohu is still a conventional Web player. Its namesake portal and Sogou search engine are rolling along nicely. Brand advertising at Sohu climbed a respectable 46% to $32.2 million. Sogou may not be in the same paid-search league as Baidu.com
The great fourth-quarter numbers came after Sohu blew analysts away in its third-quarter report. Guess what? Things can get even better.
As the official Chinese portal for the upcoming Olympic Games in Beijing, Sohu promises to be a heavily trafficked property in a few months. You don't have to wait until this year's third quarter to see that role pay off. Sohu's Olympic partners, suppliers, and sponsors grew their ad spending on Sohu by 74% last year, roughly doubling the ad revenue growth rate at Sohu on the whole. Other advertisers are likely to follow suit as the Sohu brand is elevated heading into the Olympics.
The company's guidance for the current quarter is also well ahead of where analysts are perched. Sohu expects earnings before stock-based compensation to clock in between $0.43 a share and $0.45 a share on $66.5 million to $68.5 million in revenue. Wall Street will now have to ratchet up its earnings targets of $0.32 a share on $59.0 million.
The key takeaway here is that Sohu is growing into more than just an Olympic Games play. Whether it's transforming its text-based blogs into richer multimedia tools, or debuting a second in-house online game later this year, Sohu is rolling. You'd be nuts to stand in its way.
NetEase, Baidu, and Shanda have been recommended to Motley Fool Rule Breakers newsletter service subscribers. Look into the service with a free 30-day all-access pass.
Longtime Fool contributor Rick Munarriz has been a fan of China's high-margin online stocks for a long time. He does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
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