Sohu.com, Inc. (SOHU)

My Chinese (Taiwanese) co-worker just explained to me that Sohu.com has everything that every Chinese person wants within two or three clicks of its front page. This is idiomatic of the Chinese language, in which each word is the size of one letter of an English word. So, for example, if Sohu did CAPS, this page would be all on one screen. Therefore, a link-based interface works better in Chinese than it does (or did) in English, where Yahoo! and MSN foundered while Google trounced them. Sohu is going to trounce Baidu (the Chinese Google) because nobody wants to search for things they can get within two clicks anyway, and if they did, they could use Sohu to search anyway.

Still, I expect a pullback from here. At least, I'm hoping for a pullback, because I do not yet have capital to invest. (Are you sensing a theme?)

It would be hard to find a company with more potential and a faster grwoth rate than Sohu.com. The P/E greater than 10 is not my normal pick in this recession. Nor do I usually care much for companies with a P/B of 4.75. That's a lot of growth priced in. It's low, however for a company with a 40% margin and a 53% ROE and 106% qtr/qtr growth. No debt, large moat. Chinese companies go in and out of favor with investors, but a Chinese company leading the internet infrastructure in the fastest growing country in the world can go out of investor favor, but it's organic growth will continue. Few good longs in this environment, but I'd suggest considering this one.

Internet usage in a growing China will continue. Out of the many ISP's available, SOHU has responded most favorably. China has completely jumped over the hardwired land lines for communication and the result is wireless, handheld phone/internet units that is supurb to that in the US. The Chinese government has not put their thumb on SOHU as yet.

It's gotten to expensive lately it's a direct competitor of Bidu and isn't in a partnership with Google so long term I feel it'll trend the other way as they continue gaining market share and start siphoning it away from other internet companies in there ways.

Sohu is a leading internet portal in China, which owns websites that provides information, communication, e-commerce and entertainment. Advertising accounts for major source of revenue, contributing 67% for nine months ending September 2006. Other non-advertising sources of revenues include sponsored search, wireless services, e-commerce and online games, contributing 33% for the same period.

The second largest internet market, China, with 123 million users, presents a good investment opportunity, driven by PC and broadband usage. The online advertising market in China is expected to reach $ 2 billion by 2010, growing over 30% annually. Sohu is likely to benefit from this trend with a strong set of websites across the web.

Beijing Olympics 2008 would be a key catalyst for online advertising for Sohu, as it has been selected exclusive internet sponsor to construct, maintain and host the Olympics website. Sohu creates opportunities for co-branding campaigns with major consumer brands that have marketing initiatives heading into this major event. Sohu is also the internet partner for Team China, which includes all Chinese athletes in international events till 2008.

Sohu is the fourth largest search engine in China, commanding around 8% market share. The paid search engine segment provides an excellent opportunity for its own search engine, sogou.com, by targeting the untapped 25 million Small and Medium Enterprises. The paid search engine is expected to grow by over 50% annually to reach $ 882 million by 2010 from current $ 186million level.

With strong management team, migration of advertisers to online medium and upcoming Beijing Olympics, Sohu is all set to reap the benefits of the positive trends in the Chinese internet market.

As the chinese population continues to shrink, i expect the p/e ration to get worse.

SOHU has great growth prospects in a rapidly growing market with multiple revenue streams in the Chinese internet space, because China will be less affected by the recessions in other contries.

SOHU will be less affected by any slowdown because of the rapidly growing Chinese middle class and the move to online advertising which has very low penetartion in China so far. Also China has a national goal of providing internet access to every village over the next few years and SOHU will benefit from the creation of the internet infrastructure that would otherwise take decades to construct if they relied on an free market.

SOHU is expending their online gaming business to other Asian countries and they have been well recieved. Also their online gaming business model is very effective at getting new players and then monetizing them after the new player has bonded with a game.

All their games are free to play but to enjoy the game you must purchase items in the games space with real money creating a constant stream of revenue and no potential revenue cap based on the western online gaming model. Western online games require you to purchase the game and then pay monthly to continue playing so revenue is limited by the number of players and months of play.

The SOHU online gaming model in theory also requires much less expensive marketing because players can play any game for free paying as much or as little as they want according to how much they want new items in the game space. I played games for years when I was yonger and the whole point of some games was to aquire new itmes that would give me greater ability in the game.

There advertising business is also growing rapidly and by the end of this year SOHU will have nearly the same total revenue as BAIDU. Also SOHU has beaten there earnings estimates by anaverage of 35% over each of the last 4 quarters, which if they continue to do will make them stand out in a very bleak investing environment.

All together SOHU should increase to ~$150/share over the next 12 months and if they can continue to grow at ~50/year rate that estimates predict they should be valued at the equivalent of ~700/share in 5-6 years.

fool on

As the internet advertising grows in China so will this stock.

Internet media company providing Chinese consumers with theiri daily source of information, entertainment and communication., ROE 52.46, GM 74.99, PM 36.96, sales growth increasing each year. 5 year growth rate 46.78

Chinese yahoo that knows how to make money.

Technical reasons

growing user base

As the Chinese version of Google, the native version of the search engines offers far more to Chinese-speakers than its Western counterpart.
Sohu offers much more to the Chinese and has become extremely popular. I'm keeping my eye on this one, in the case it becomes as successful as Ctrip.com.

Plenty of room for upside. Can't find any negatives with this stock. Only thing holding it back is past experience with US internet company's bubble burst. Once people realize China's pure need & dependence on the internet, coupled with the fact that China's internet using population, blows ours out of the water, there will be nothing at all holding this one back! Keep an eye out for continued upward trend on stock price & company earnings.

p.s. Check out company's financials (CASH ON HAND)!!!!!

it has amazing qtly growth rate about 285%. and still has a lot of potential to growth like baidu and google co.

5.000

Trending upward

OUT PERFORM 6-10 MONTHS A VERY STRONG GROWTH.

cabot