Sohu.com (SOHU) Up 1.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Sohu.com (SOHU). Shares have added about 1.7% 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's Q3 Loss Narrower Than Expected, Revenues Decline
Sohu reported relatively soft third-quarter 2022 results with a year-over-year decrease in revenues and earnings due to lower contributions from both the brand advertising sector and online games. The company aims to focus on refining its products and improving operational efficiency in the impending quarters.
Net loss from continuing operations in the quarter was $21.6 million or a loss of 63 cents per ADS against net income of $12.3 million or 31 cents per ADS in the year-ago quarter. The significant decline in the bottom line was primarily attributable to top-line contraction and higher operating expenses in the reported quarter and income from divested operations in the year-earlier quarter. Non-GAAP net loss in the quarter was $17 million or a loss of 50 cents per ADS, narrower than the Zacks Consensus Estimate of a loss of 72 cents.
Revenues in the reported quarter declined to $185.3 million from $216.1 million in the year-ago quarter owing to adversities stemming from the pandemic and uncertain macroeconomic environment. However, the top line beat the consensus estimate of $181 million.
Brand advertising revenues declined 23.4% year over year to $25.8 million. Online games revenues of $148.9 million were down 10.7% due to the natural decline of Little Raccoon: Heroes launched in third-quarter 2021. Other revenues totaled $10.6 million, down 32.1%.
For PC games, total average monthly active user accounts (MAU) were 2.1 million, up 6% year over year, due to improved performance of some of the older games driven by content updates and higher promotional activities during the quarter. Total quarterly aggregate active paying accounts (APA) were 1 million, up 4% year over year.
For mobile games, total average MAU was 2.5 million, down 45% year over year due to the natural decline of Little Raccoon: Heroes. Total quarterly APA was 0.6 million, down 44% year over year.
Quarterly GAAP operating profit was $131.6 million, down 17.4% from the year-ago quarter. Operating expenses jumped 11.3% due to an increase in marketing expenses.
As of Sep 30, 2022, the company had $516.8 million in cash and cash equivalents with $436.7 million of long-term tax liabilities.
For the fourth quarter of 2022, Brand advertising revenues are estimated to be in the range of $25-$28 million, which implies a decrease of 17% to 26% year over year. Online game revenues are estimated in the band of $118-$128 million, which indicates a decrease of 11% to 18% year over year. Sohu’s non-GAAP net loss is likely to be between $10 million and $20 million. GAAP net loss is projected between $13 million and $23 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted 27.4% due to these changes.
Currently, Sohu.com has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Sohu.com has a Zacks Rank #2 (Buy). We expect an above average 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, Etsy (ETSY), a stock from the same industry, has gained 5%. The company reported its results for the quarter ended September 2022 more than a month ago.
Etsy reported revenues of $594.47 million in the last reported quarter, representing a year-over-year change of +11.7%. EPS of $0.58 for the same period compares with $0.62 a year ago.
For the current quarter, Etsy is expected to post earnings of $0.89 per share, indicating a change of -19.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.2% over the last 30 days.
Etsy has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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