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Why Shares of Tanked Today

Timothy Green, The Motley Fool

What happened

Shares of (NASDAQ: SOHU) tumbled on Monday after the Chinese internet company reported its second-quarter results. Sohu missed analyst estimates across the board and provided revenue guidance that was well below expectations, sending the stock down 23.9% by 12:30 p.m. EDT.

So what

Sohu reported second-quarter revenue of $474.8 million, down 2.3% year over year and about $5.6 million below the average analyst estimate. Brand advertising revenue was down 29% year over year to $44 million, search and search-related advertising revenue was up 2% year over year to $276 million, and online game revenue was up 8% year over year $102 million.

A declining stock charts superimposed over columns of blue numbers

Image source: Getty Images.

Sohu posted a non-GAAP (adjusted) loss per share of $1.27, flat compared to the prior-year period and $0.12 lower than analysts were expecting. "Under the current challenging macroeconomic environment, our total revenues stayed largely in-line with our prior guidance," said CEO Dr. Charles Zhang in prepared remarks included in the earnings release.

Now what

For the third quarter, Sohu expects to deliver revenue between $445 million and $470 million. Brand advertising revenue is expected between $45 million and $50 million, down 12% to 21% year over year; revenue from the Sogou search business is expected between $304 million and $314 million, up 10% to 14% year over year; and revenue from online gaming is expected between $80 million and $90 million, down 6% to 17% year over year.

Third-quarter non-GAAP net loss per share is forecast between $0.55 and $0.80. Analysts were expecting revenue of $499 million and per-share loss of $0.96.

While Sohu's earnings guidance was better than expected, a weak quarter and poor revenue guidance was enough to send the stock lower.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends The Motley Fool has a disclosure policy.

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