Yahoo Finance Sohu.com (SOHU) Up 8.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Sohu.com (SOHU). Shares have added about 8.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sohu.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Sohu Incurs Wider-Than-Expected Loss in Q1 on Lower Revenues
Sohu reported soft first-quarter 2024 results, with the bottom line missing the Zacks Consensus Estimate. Despite increasing user engagement and innovative strategic investments in its platform, the leading provider of online advertising, media and gaming services in China recorded year-over-year lower revenues owing to the adverse impact of rigid government regulations and macroeconomic headwinds.
Net Income
On a GAAP basis, the company incurred a net loss of $25 million or a loss of 76 cents per American Depository Share (ADS) compared with a net loss of $17.9 million or a loss of 53 cents per ADS in the prior-year quarter. Top-line contraction primarily led to the year-over-year wider loss during the quarter.
Non-GAAP net loss was $21.6 million or a loss of 65 cents per ADS compared with a net loss of $12.6 million or a loss of 37 cents per ADS in the year-ago quarter. Non-GAAP net loss for the reported quarter was wider than the Zacks Consensus Estimate of a loss of 22 cents.
Revenues
Revenues in the reported quarter declined to $139.4 million from $161.8 million a year ago. The decrease in net sales in all the major business verticals impeded the top line during the quarter.
Brand Advertising revenues declined 29% year over year to $16.1 million, while revenues from Online Games totaled $117.8 million, down 9% year over year. A decline in portal, video and real estate advertising revenues and growing competition in the online video market led to the downside. Other revenues totaled $5.5 million, down from $9.8 million in the year-ago quarter.
For PC games, the total average monthly active user accounts (MAU) were 2.3 million, up 5% year over year. Total quarterly aggregate active paying accounts (APA) were 0.9 million, up 1%.
For mobile games, the total average MAU was 2.8 million, up 71% year over year led by significant traction from Haikyu!!FLY HIGH launched in the quarter in Japan and South Korea. Total quarterly APA remained flat at 0.3 million.
Other Details
Quarterly GAAP gross profit was $106.7 million compared with the year-ago quarter’s tally of $121.4 million, with a respective gross margin of 76.5% and 75%. Non-GAAP gross margin for the Brand Advertising business decreased to 1% from 17% in the prior-year quarter, while that for Online Games was 88%, up from 85% in the year-ago quarter.
Non-GAAP operating expenses were $132.8 million, down 4% year over year.
Liquidity
As of Mar 31, 2024, the company had $318.7 million in cash and cash equivalents with $481.6 million of long-term tax liabilities.
Outlook
For the second quarter of 2024, Brand Advertising revenues are estimated to be in the range of $18-$20 million, which indicates a decrease of 16% to 25% year over year. Online Games revenues are estimated in the band of $133-$143 million, which indicates an increase of 12% to 21% year over year. Sohu’s non-GAAP net loss is likely to be between $27 million and $37 million. GAAP net loss is projected between $30 million and $40 million.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, Sohu.com has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Sohu.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Sohu.com is part of the Zacks Internet - Services industry. Over the past month, Shopify (SHOP), a stock from the same industry, has gained 12.7%. The company reported its results for the quarter ended March 2024 more than a month ago.
Shopify reported revenues of $1.86 billion in the last reported quarter, representing a year-over-year change of +23.4%. EPS of $0.20 for the same period compares with $0.01 a year ago.
Shopify is expected to post earnings of $0.21 per share for the current quarter, representing a year-over-year change of +50%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.6%.
Shopify has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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