TOP CONTRIBUTORS

Paul Cheung

SOHU AT A GLANCE

P/E ► 13.6 AVG EV/EBITDA ► 17.7 AVG ROA ► 39.7% VERY HIGH ROE ► 53.2% VERY HIGH Debt to Equity ► 0.320 AVG Current Ratio ► 3.25 AVG

 

 

 

 

 

 

Revenue, Net Income, and Net MarginRevenue, Gross Profit, and Gross MarginOperating IncomeEbitIncome Before TaxesNet Income from Continuing OpsInterest vs Continuing IncomeInterest CoverageOperating Expenses Research & DevelopmentSG&AAmortization & Depreciation

Sohu.com, Inc., (SOHU), is a leading online brand in China. Services provided by the company include news, search, e-mail, games and wireless messaging. The company offer services through one of the most comprehensive matrices of Chinese language web properties and proprietary search engines, consisting of the mass portal and online media destination sohu.com interactive search engine sogou.com online mapping service provider go2map.com online alumni club chinaren.com games information portal 17173.com real estate website focus.cn and wireless value-added services provider goodfeel.com.cn. SOHU markets its products and services to clients primarily in China. The company has approximately 1,000 employees. SOHU competes with various Internet service providers, including Web directories, search engines, content sites, and sites maintained by the government and educational institutions. In the first three quarters of 2007, the company derived about 69% of its revenue from online advertising. Wireless business and online games contributed 31% of the company's revenue.

SOHU reported blockbuster financial results for the third quarter of 2007. Both the company's revenue and earnings exceeded market expectations because of strong growth in online game and advertising business. Gross margin of 66.7% in the third quarter of 2007 increased from 60.6% in the previous quarter. Brand advertising revenues were US$29.8 million, up 42% year-over-year and 12% quarter-over-quarter. Online games revenues were US$12.7 million, up 473% year-over-year and 232% quarter-over-quarter.

Although SOHU faces fierce competition from different fields including brand advertising, online game, wireless value added services, and search, the company manages to be a main player in almost each field. With the Beijing 2008 Olympics sponsorship, SOHU has a well-known brand and rich website resources to leverage the great opportunities for online business in China. Overall, we think the current stock price is overvalued. Therefore, we are upgrading the stock from Hold to Buy on SOHU shares.

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