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Sohu.com (SOHU) Q4 Earnings Beat Estimates, Revenues Up Y/Y

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Zacks Equity Research
·4 min read
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Sohu.com SOHU reported fourth-quarter 2020 adjusted earnings of $1.18 per share, which beat the Zacks Consensus Estimate by a wide margin of 237.1%. The company had reported a loss of 75 cents per share in the year-ago quarter.

Moreover, revenues jumped 34% year over year to $253 million.

Notably, on Sep 29, 2020, Sohu.com announced entering into a Share Purchase Agreement with Tencent Holdings Limited TCEHY and its subsidiaries with respect to the sale of Sogou’s shares to Tencent.

Consequently, Sogou’s results of operations have been excluded from the company’s fourth-quarter 2020 results from continuing operations.

Notably, the company’s continued focus to provide real-time, reliable news and premium content through Sohu Media Portal and Video contributed to top-line growth amid the coronavirus crisis. In addition, upgrades related to live broadcasting technology and its integration with the Sohu product portfolio were major positives for the Sohu Media Portal and Video.

Sohu.com Inc. Price, Consensus and EPS Surprise

Sohu.com Inc. Price, Consensus and EPS Surprise
Sohu.com Inc. Price, Consensus and EPS Surprise

Sohu.com Inc. price-consensus-eps-surprise-chart | Sohu.com Inc. Quote

Top Line Details

Brand advertising revenues for the fourth quarter remained flat year over year at $42 million. Moreover, online game revenues of $196 million jumped 49% from the year-ago quarter’s levels, aided by the successful launch of special servers for TLBB PC.

Meanwhile, other revenues edged down 0.7% year on year to $15.4 million.

For Changyou’s PC games, total average monthly active accounts were 2.3 million, up 5% year over year, on the successful launch of the TLBB Vintage during the reported quarter, partially offset by the discontinuation of the Warframe operation.

For mobile games, total average monthly active accounts summed 2.4 million, a decline of 35% year over year on the reducing life cycles of Changyou’s older games such as Legacy TLBB Mobile and TLBB Honor.

Changyou’s total revenues climbed 47% year over year to $199 million. Changyou posted an operating profit of $112 million compared with the $50 million witnessed in the same quarter last year.

Margins

Non-GAAP gross margin in the quarter increased to 79% from the 64% reported in the year-ago quarter.

Brand advertising business margin remained flat year over year at 31%. Meanwhile, online games non-GAAP gross margin was 90%, up from the year-ago quarter’s 75%. This uptick primarily resulted from growth in online game revenues, along with lower online game costs, thanks to reduced revenue-sharing payments in relation to TLBB Honor.

Non-GAAP operating expenses were $132 million, up 15% year on year mainly due to higher marketing expenses and elevated Changyou’s licensing fees.

Sohu’s non-GAAP operating profit was $68 million, significantly up from the year-ago quarter’s $6 million.

Balance Sheet

As of Dec 31, 2020, Sohu’s cash and cash equivalents (and short-term investments) came in at $318 million compared with $192 million as of Sep 30, 2020.

Q1 Guidance

For first-quarter 2021, Brand advertising revenues are anticipated in the range of $27-$32 million, which indicates a year-over-year increase of 5-25%.

Online game revenues are expected in the band of $137-$147 million, which indicates a year-over-year increase of 3-10%.

Zacks Rank & Stocks to Consider

Sohu.com currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are CDW Corporation CDW and Cohu COHU. Both stocks carry a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

CDW and Cohu are scheduled to report quarterly numbers on Feb 10 and 11, respectively.

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