(By Salman - iStockAnalyst Writer)
Sohu.com (NASDAQ: SOHU), the second internet search engine company in China, is expected to register strong growth in coming times, despite challenging economic headwinds.
The Chinese internet market offers huge potential for a household name like Sohu. According to comScore, an online metrics company, the number of people worldwide going online passed one billion for the first time in January. According to comScore, almost 180 million internet users-over one in six of the world's online population-live in China, more than any other country. It is for the first time that any country has surpassed the U.S. in terms of online users.
A couple of days back, the company announced impressive quarterly results.Net income for the fourth-quarter nearly quadrupled to $56.6 million, or $1.45 a share $15.1 million, or 39 cents a share in the prior year quarter. On an adjusted basis, the company earned $1.35 a share, beating consensus estimates of $1.16 a share by a wide margin. Revenue increased 86% to $121.6 million from $65.3 million.
The online games segment of the company performed quite well in the quarter, as the revenue from online gaming jumped 140% in the quarter. Online gaming now represents around 48% or $58.4 million of total revenue, nearly double that of $23.96 million in the same quarter a year ago. Now this is something which is quite interesting. Online gaming in recent few months has continued to show resilience as users have been seen shifting to cheap source of entertainment. Online gaming segment is thus expected to help the company reap rich dividends even in case of a prolonged global economic slump.
Revenue from the wireless segment also nearly doubled to $14.8 million from $7.3 million in prior year period.
Revenue from brand advertisement grew 38% to $46.7 million from $33.7 million in the comparable quarter in 2007. This segment offers exciting growth potential as advertisers are expected to migrate to online advertisement as it is being seen as more cost effective than other mediums.
The company's Q1 earnings guidance exceeded Wall Street estimates as well. Sohu expects to earn in the range of $1.05 to $1.10 a share on adjusted basis in the first quarter. The company expects to report first quarter revenue in the rage of $111.5 million and $115.5 million. Analysts currently expect the company to post $117.41 million in revenue.
The company has a strong debt free balance sheet with plenty of cash. The company boasts more than $270 million cash on its balance sheet. With a forward P/E of 9.89 and PEG ratio of 0.26, the company's stock looks attractively cheap.
Shares of the company rose $3.55 or 7.79% to $49.16 in regular trade on Monday.
Disclosure: Author does not own any of the stocks discussed here.
