We are maintaining our Buy rating on the shares of Sohu.com Inc. (SOHU), a leading online brand in China. Third quarter numbers were in line with our estimates. The company reported total revenue of $120.7 million, GAAP earnings of $1.02 and Non-GAAP earnings of $1.08.

The tax rate was below our estimate, and we have adjusted future estimates upward to reflect a lower tax rate. We expect SOHU to hold its gain in revenue from the Olympics due to the rapid growth in Internet usage in China.

The stock is trading at 12.3X our N4Q EPS estimate, which is below to the industry median. The PEG ratio is also well below the average of the group. Based on a 15 P/E ratio and our estimate of the N4Q earnings the price target of $70 is very reasonable yet still does not reflect the ROE of Sohu.Com which could lead to further upside in the valuation.