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Market Sentiment Around Loss-Making Sohu.com Limited (NASDAQ:SOHU)

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Simply Wall St
·3 min read
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Sohu.com Limited (NASDAQ:SOHU) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Sohu.com Limited provides online media, search, and game services on personal computers (PCs) and mobile devices in the People’s Republic of China. The US$626m market-cap company posted a loss in its most recent financial year of US$127m and a latest trailing-twelve-month loss of US$111m shrinking the gap between loss and breakeven. As path to profitability is the topic on Sohu.com's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Sohu.com

Sohu.com is bordering on breakeven, according to the 3 American Interactive Media and Services analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$13m in 2022. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 103% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Sohu.com given that this is a high-level summary, however, take into account that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 19% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Sohu.com, so if you are interested in understanding the company at a deeper level, take a look at Sohu.com's company page on Simply Wall St. We've also put together a list of pertinent factors you should look at:

  1. Valuation: What is Sohu.com worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Sohu.com is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Sohu.com’s board and the CEO’s background.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.