Tuesday, March 24, 2009

Louis Navellier and SOHU - Again...

... and again... and again.

Global Growth

April 21st 2008
Company: Sohu.com Inc. (SOHU)
Country: China
Industry: Internet Software/Services
Buy Below: $63.37
China’s Sohu.com Inc. (SOHU) operates China’s leading Web portal and offers communication tools such as e-mail, instant messaging and 30 content channels covering news, sports, business and other topics. The company also operates Web sites devoted to alumni communities, gaming and real estate. Sohu Entertainment offers search services through Sogou, which is translated “search dog.” Sohu’s Chairman and CEO Charles Zhang founded the company in 1996 as Internet Technologies China, changing its name to Sohu in 1999. Zhang owns 25% of the stock.
A Goldman Sachs analyst just raised first quarter estimates for Sohu, citing the strength of its online game “Tian Long Ba Bu.” In a note to clients, Goldman analyst Leah Hao said, “We believe the high-margin game revenue will also likely drive earnings-per-share upside.” Hao raised her first quarter game revenue estimate by $4 million, increasing her total revenue estimate for the quarter to $72.8 million. She also raised her first-quarter earnings estimate to 42 cents per share, up from 34 cents. The company will announce its first quarter earnings on April 28.

March 23rd 2009
Sohu.com was our oldest Buy List stock, a holdover from the meltdown of last fall that I was hoping could struggle back up to a decent profit. But with a poorly-planned IPO, this company really shot itself in the foot last week. Since Sohu would be spinning off it's highly profitable online gaming business, there's no point in owning this stock anymore since I don't expect it to do well without this core profit source. I have to admit I was baffled and a bit angry to see such poor leadership in this company. The stock was consistently near the top of our Buy List, but this ill-advised move has hurt share prices and makes me seriously question if company executives know what they're doing. Aside from the market's hostile environment to IPOs in general, to cut out the most profitable part of Sohu.com right now is a real bonehead move.
Sell price: $40.13
Somewhere in between
Buy below $92

Return
-30% for Mr. Navellier
-56% for those who followed him buying at the beginning of June 2008
Quantum Growth
May 5th 2008
Sohu.com (SOHU) operates China's leading Web portal and offers communication tools such as e-mail and instant messaging, as well as more than 30 content channels covering news, sports, business and other topics. The company also operates Web sites devoted to alumni communities, gaming and real estate. Additionally, the company provides Internet access through its Sohu Entertainment ISP and search services through Sogou, which means "search dog." Sohu's Chairman and CEO Charles Zhang founded the company in 1996 as Internet Technologies China. Zhang launched Sohu.com in 1998 and changed its name the next year. CEO Zhang owns 25% of the company's stock.
On Tuesday, Sohu announced that its first-quarter earnings rose 358.3% to 55 cents per share from 12 cents per share last year. Sales surged 156% to $84.8 million. Sohu said its sales were strong despite a quarter that included the Chinese New Year, which is usually a slow time for Chinese business and might have been aided by the country's worst snowstorms in decade.
China's Xinhua News Agency recently announced that China's population of Internet users rose to 221 million in February and is now vying with the U.S. as the world's largest Internet market. I think the company will also benefit from Olympic-related advertising. Sohu is a good buy.
Buy price: $76.00
Buy below $84.45
March 23rd 2009
Sohu.com (SOHU) is our second sell this week. The company’s share price pulled back after it announced the spin-off of its gaming division, ChangYou.com. This was a very ill-advised move that is very frustrating and makes me wonder what company executives are thinking. Most of Sohu’s non-advertising income comes from its online games business, and that means a ChangYou spin-off will affect Sohu’s bottom line. Some of the company’s officials have tried to do damage control, saying Sohu.com’s numbers won’t take a hit since the Internet provider will retain a 71% ownership stake in the new company. But this is down from the 84% Sohu.com previously held, so I’m not sure these guys know how to do math properly. This gaming business was the foundation of my confidence in this company—and why it was a regular member of our Top 5 list in recent weeks—so without it, there’s no point in holding on to this stock anymore.
Sell price: $40.13
Somewhere in between

Buy below $92
Return
-47%
for Mr. Navellier
-56% for those who followed him buying at the beginning of June 2008

1 comment:

Blogger said...

+$3,624 profit last week!

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