Sohu.com, Inc. (SOHU) reported blockbuster financial results for the first quarter of 2008. The companyâs revenue and earnings greatly exceeded market expectations and company guidance because of strong growth in its online game business.
Although SOHU faces fierce competition from different fields, 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.
On April 28, Sohu reported unaudited financial results for the first quarter ended March 31, 2008. For the first quarter, its total revenues were US$84.8 million, up 156% year-over-year and 30% quarter-over-quarter. Its brand advertising revenues were US$33.2 million, up 41% year-over-year and 3% quarter-over-quarter. Its online game revenues were US$41 million, up 24 times year-over-year and 71% quarter-over-quarter. Its net income was US$21.6 million or US$0.55 per fully diluted share. Its net income increased by 383% year-over-year and 43% quarter-over-quarter.
Therefore, we are maintaining Buy recommendation on SOHU shares based on its strong growth momentum. The stock is trading at 30.3x our 2008 EPS estimate, which is lower than the industry mean. The stock is also trading at 29x our 2009 EPS estimate, which is far lower than the industry mean. Using a P/E multiple of 32x our fiscal year 2009 earnings per share estimate of $2.49 yields a target price of $80, which we believe reflects the companyâs growth prospects.
Read the full analyst report on SOHU.
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.