Deutsche Bank to maintain Sohu hold rating target price reduced to 58 U.S. dollars

Beijing time July 28 Evening News, Deutsche Bank released its investment report today, maintaining the Sohu stock (Nasdaq:sohu) "Hold" rating, the target share price lowered 3% to 58 U.S. dollars.

The following is a summary of the contents of the report:

Second-quarter revenue lower than expected: Sohu 2014 second quarter revenue for 400 million U.S. dollars, the chain growth of 10%, year-on-year growth of 18%, than we and Wall Street expectations lower 2%. Based on non-US GAAP, operating loss of 35 million U.S. dollars, better than our expected loss of 54 million U.S. dollars and Wall Street expected losses of 59 million U.S. dollars, mainly thanks to the game Research and Development Department of the number of employees cut. The loss of 0.88 dollars per share is diluted. Sohu expects revenue from the third quarter to grow 16% to 20% year-on-year, down 4% from Wall Street expectations, and largely dragged down by the expected slump in gaming revenues.

Sogou Business Performance Strong: The second quarter, Sogou revenue for 91 million U.S. dollars, an increase of 82%, higher than we expected year-on-year growth of 77%. We expect Sogou's net profit in the second quarter to reach a record high of $16 million trillion, based on non-US general accounting standards. Based on strong financial performance, we believe Sogou has more space to invest in the core search business, including further integration with Tencent's assets.

Game reorganization faces execution risk, video continues to lose money: Game business revenue for 154 million U.S. dollars, down 9% year-on-year, the chain down 6%, lower than our expectations of 5%. Third-quarter game revenue guidance expected (flat) is 11% lower than our forecast. We believe that a dip in the transition platform is faced with implementation risks, and a reduction in research and development teams may further affect long-term growth. As for the video business, in view of the continued growth in regulatory pressure, we believe that Sohu video business will continue to lose money in the near future.

Adjusted performance expectations: We will sohu 2014 fiscal year, 2015 fiscal year and 2016 fiscal year revenue forecasts respectively lowered 4%, 5% and 4%, will be in the fiscal year 2014 and 2015 per share of diluted losses expected to increase by 4% and 12% respectively.

Valuation: We continue to maintain the Sohu stock "hold" rating, the target share price lowered 3% to 58 U.S. dollars. (Li Ming)