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Wednesday, June 29, 2022

Will Sohu.com (SOHU) Continue its Upward Trajectory?

Sitting at a comfortable USD$2.69 increase to USD$19.33 as of April 9, 2021, 1:37 p.m. EDT, Sohu.com (SOHU) saw a 16.2% increase in share price to complement its 136% return over the course of just a year. The fact that SOHU reported an overall loss over that period of time suggests that investors are relying on the rate and extent of revenue growth for the time being when deciding to invest. With an underwhelming growth in revenue of only 9.2% in the previous year, SOHU is fortunate to have had the gain in shareholder returns it did. Moving forward, fundamental developments seem to dictate which way the share price will swing.

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SOHU Shows Strong Number in Year-Over-Year Comparisons

SOHU’s Q4 2020 report indicated adjusted earnings of USD$1.18 per share, compared to a USD$0.75 loss per share in Q4 of 2019. Revenues also increased by a margin of 34% to $253 million over that same time period. In addition to these stellar reportings, SOHU and Tencent Holdings Ltd entered a Share Purchase Agreement for Sogou.com, SOHU’s interactive search engine that has become the second-largest mobile search engine in China.

What Does SOHU do?

SOHU provides a spectrum of online services and sites built around information, entertainment and communication. They provide brand advertising services online on their various websites. They have also penetrated the mobile app market with a variety of news and information services. Changyou, which is a subsidiary of Sohu.com is responsible for the development and operation of a host of games for both PC and mobile platforms. They are the developers of Tian Long Ba Bu, which has become immensely well-received in China.

Where Does SOHU’s Revenue Come From?

Revenues from their advertising for Q4 of 2020 stayed constant at USD$42 million, while revenues from their online games increased by 49% to an impressive USD$196 million. This growth can largely be attributed to the successful release of special servers for their flagship game. Other revenues are reported to have fallen by 0.7% from a year ago down to USD$15.4 million, but average active monthly accounts on Changyou’s computer games were up 5% to it 2.3 million compared to a year ago. Their mobile games saw a 35% decline to an average active monthly account of 2.4 million.

Will SOHU continue to rise?

All things considered, Changyou’s total revenues saw an increase of 47% over the course of a year to hit USD$199 million. It reported an operating profit of USD$112 million up from the USD$50 million a year ago. SOHU seems to be poised on the verge of further growth and how they continue to adapt to the post-pandemic world will ensure if they continue to grow or not.

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