Sohu.com Delivers Subdued Q1 Numbers

Chinese online media, game, and video products provider Sohu.com (SOHU) announced first-quarter numbers on Monday.

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The results were characterized by double-digit declines across brand advertising due to lower advertising revenue. Consequently, total revenue dropped 13% over the prior-year period to $193 million.

In tandem, non-GAAP net income declined to $9 million, from $37 million in the comparable year-ago period.

Management Weighs In

Chairman and CEO of Sohu.com Dr. Charles Zhang commented, “In the first quarter of 2022, despite the negative impact of COVID-19 and a challenging macroeconomic environment, we continued to focus on product refinements and improving operational efficiency.

“We also focused on user acquisition for our key mobile products and explored ways to improve monetization for both Sohu Media Portal and Sohu Video.”

During the quarter, the company also undertook product upgrades and improvements in the Sohu Media Portal, and extended live broadcasting to a higher number of scientific fields in Sohu Video.

Looking ahead to the second quarter, the company anticipates a year-over-year decrease of 32% to 40% in Brand advertising and a 1% to 6% decrease in Online game revenue. Non-GAAP net loss is seen landing between $15 million and $5 million.

Analyst’s Take

Morgan Stanley analyst Alex Ko has reiterated a Hold rating on the stock while decreasing the price target to $17 from $19.

The lowered price target still implies 17.73% upside in the stock.

Investors Remain Confident

TipRanks data indicates investor sentiment remains very positive about Sohu.com. Further, the number of portfolios holding Sohu.com has increased by 3.8% in the last seven days.

Closing Note

This quarterly performance was marked by declines across the company’s verticals with more pain anticipated in the next quarter. Investors have been shying away from Chinese names for a while now, and last month the SEC added the company to its Holding Foreign Companies Accountable Act.

While this development may not bode well, a forward price-to-earnings multiple of over 100 still makes Sohu.com seem expensive in the current market scenario.

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