Goldman keeps Sohu Neutral rating down to $54 trillion

Beijing time November 4 Morning news, Goldman Sachs Group released a study today, the Sohu (Nasdaq:sohu) stock rating maintained in the "neutral" (Neutral) unchanged, while its 18-month target price cut 4% to 54 U.S. dollars.

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

Performance in line with expectations: Sogou business has made progress in both traffic and commercialization

-Performance:

Sohu's third-quarter revenue and outlook for the fourth quarter were slightly below expectations. Revenue for the quarter was 430 million US dollars (up 17% per cent year-on-year). The average forecast for analysts surveyed by Bloomberg was 2%; the loss of 0.61 US dollars per share of U.S. depository receipts in the US General accounting standards was less than $0.2 trillion for the average loss per share expected by Wall Street analysts. Sohu expects a fourth-quarter revenue of $442 million to $462 million, which is 3% lower than average Wall Street analyst expectations, mainly because of outdated desktop gaming.

-Investment advice:

1 Search: Sogou Search and Input method (monthly active users more than 200 million people) of the flow continues to grow, mainly because the company took a positive marketing measures, and Tencent (0700.HK) reached a cooperation. In the third quarter, Sogou's mobile search traffic ranked second, desktop search traffic ranked third. Mobile search revenue quarter-on-quarter growth of 20%, mainly due to the promotion of QQ browser, each thousand impressions cost approximation Desktop Search 40%. The quarter's search revenue exceeded $100 million trillion, with mobile search revenues growing 40% per cent on a month-on-month basis and a 15% percentage of total search revenue.

Sogou Management signed the Korean star Kim Soo (Kim so Hyun) as a spokesperson. Despite the huge amount of marketing spending, Sogou still achieved 6 million dollar operating profit in the third quarter (not in accordance with US GAAP). Management expects the fourth-quarter search business to be 118 million dollars to 123 million dollars.

2 Brand Advertising: Sohu video growth of 40%, 60% of the number of viewers from the mobile platform. Sohu recently acquired the video platform 56.com, the platform focused on user generated content (UGC), the transaction is designed to enhance Sohu's position in this industry, as well as the focus on professional content Sohu video business to supplement. Management discussed the strategy of continuing to focus on the introduction of American dramas, but at the same time allocating more resources to develop long format episodes in-house.

3 game: The profit of the subsidiary swims (nasdaq:cyou) exceeds our expectation.

We cut our earnings forecasts for the 2014 fiscal year 2016 to 1% to 13% per share, reflecting the company's investment in Sogou, video and gaming businesses. This allowed us to set the 18-month target price for Sohu shares down 4% to $54, based on the classification plus the total law. We will maintain Sohu's stock rating in the "neutral" unchanged.

Risk：

Downside risk: Game, competition, upside risk: Sogou. (Tangfeng)