Sohu.com Inc.SOHU

Morningstar Rating

Stock Research and Analysis

by Iris Tan

Sohu.com is striving to differentiate itself as a technology-driven and product-oriented firm with launches of the search engine Sogou, the Sohu 3.0 Web site, and its online gaming service. We think these products and services bode well for growth.

According Read more

Bulls Say

Sohu has a diversified revenue stream in brand advertising, online gaming, and wireless businesses. Its diversified revenue mix and fat profits from the online gaming business should better support its aggressive media strategy financially.

Despite its early stage, Sohu's video strategy should become a long-term growth driver for its online advertising business.

The integration of Sohu's various Web properties driven by technology upgrades and its gaming business reinforce each other in both user traffic and monetization.

Sohu may have significant upside potential in its technology strength and diverse portfolio of business, which better protect the firm from unexpected hits or slowdowns in certain sectors.

Similar to Tencent, Sohu offers a diversity of advertising forms (display ad, video ad, search ad, community ad, in-game ad, etc.) across its popular Web prosperities. Such integrated marketing solution can be attractive for large advertisers. Read more

Bears Say

Sohu's value-added wireless service business faces risks, including additional adverse policies imposed by Chinese mobile operators that regulate the market and the potential for direct competition from China Mobile CHL.

Sohu seems to be having difficulties driving traffic among, and profiting from, its various community-based Web properties.

Sohu's gaming business depends highly on its hit game, TLBB; the longer-term success of this segment remains to been seen.

The Chinese online gaming market faces increasing regulatory risks, as the Chinese government recently tightened censorship of game content.

The management of Sina SINA (Sohu's closest rival) recently gained controlling interest in the company through the management buyout. This may result in greater competition in the marketplace. Read more

Strategy

Sohu strives to be a leading platform for brand advertising, online gaming, search advertising, and other nascent forms of online advertising by investing in premium content acquisition, its proprietary Read more

Management

Founder, chairman, and CEO Charles Zhang holds about 19% of Sohu's shares. All directors and executive officers as a group holds about 22% of the company. The company paid aggregate cash compensation of about $5.1 million to Sohu's four executive officers Read more

Profile

Sohu is the leading Internet portal in China, with seven branded Web sites. In addition to Web portal Sohu.com, the firm operates an online gaming subsidiary (Changyou.com), Read more

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