Maintain Sohu stock holding and wait-and-see rating

Morgan Stanley today issued an investment report to maintain the "Nasdaq:sohu" rating of Sohu shares.

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

Third-quarter results: The total revenue of 368 million U.S. dollars, an increase of 29%, compared with our expectations of 1% higher, consistent with the company's guiding expectations. Based on non-US GAAP, each share of the U.S. depository shares diluted earnings of 0.51 of dollars, and the company's guidance is expected to be 0.50 U.S. dollars to 0.55 U.S. dollars. Based on the United States General accounting standards, the net loss of 65 million U.S. dollars, diluted per share loss of 1.69 U.S. dollars, mainly due to the special dividend on the Sogou related to the cost of 82 million dollars.

Strong advertising performance: The third quarter of the advertising revenue of 177 million U.S. dollars, an increase of 56%, mainly thanks to the online video and real estate advertising promotion. Brand advertising revenue of 125 million U.S. dollars, an increase of 60%, mainly thanks to the "good voice of China," the second quarter of the strong performance. Search and other revenue for 52 million U.S. dollars, an increase of 48% per cent, consistent with the company's guiding expectations.

Game business and expectations are consistent: Online game revenue of 161 million U.S. dollars, an increase of 7%, mainly thanks to the "Divine Comedy" and the New MMO game "Dou Breaking the Sky" outstanding performance, thus making up for the "Tianlong Eight" of the downturn.

Weak profit margin: third quarter, Sohu operating profit margin of 14%, the chain fell 4%, year-on-year decline of 8%, and our expectations. The decline in profit margins is largely dragged down by investment in mobile services, online video and gaming.

Forecast for the quarter: we expect revenue from the fourth quarter to grow 26% to 30% year-on-year, up from our previous forecast of 25%. Brand advertising will grow 46% to 52% year-on-year, net game revenue will grow 8% to 11% year-on-year. Sohu estimates that, based on non-US GAAP, net losses will reach $11 million trillion to $13 million trillion, while net profits for the third quarter were $20 million trillion, a net profit of $28.2 million a year earlier.