Morgan Stanley maintains Sohu shares overweight rating

Sina Science and technology news Beijing time of July 26 night, Morgan Stanley today issued an investment report to maintain the Sohu stock (Nasdaq:sohu) "overweight" rating.

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

Sohu will release its second-quarter earnings in the 2013 fiscal year before the opening of the U.S. stock market on July 29, and hold a earnings conference call at 8:30 A.M. Eastern July 29.

Performance expectations:

We expect revenue to reach $339 million trillion, up 33% from a year earlier, while the guideline is expected to grow 30% to 34% year-on-year. Net profit will reach 21.7 million U.S. dollars, diluted earnings per share of 0.57 dollars.

Earnings Focus:

Advertising prospects: The first half of this year, Sohu brand advertising revenue rebounded, the first quarter year-on-year growth of 32%, the second quarter is expected to grow 41% to 44%, mainly thanks to the lower base and network video business rebound. But whether this growth trend is sustainable is still unknown,

Because China's macroeconomic situation is still uncertain, the network video market competition is very fierce.

Online Games: We expect Sohu's online gaming business to remain strong, with revenue growth of 23% in the second quarter, and a 20% to 24% per cent increase in guidance. "Tianlong Eight" is still the main source of revenue, the game's content update will be released in the fourth quarter, is expected to continue to promote Sohu gaming business growth. Given the large amount of cash in the swim and the need for Sohu to develop new business, we expect the tour to announce another special dividend.

Profit margin: In the short term, Sohu may face the pressure of profit margin, mainly because of higher research and development investment and promotion costs. Sohu has previously said that the expected margin will remain in the second quarter of the level.

Valuation: We continue to maintain the Sohu stock "overweight" rating. (Li Ming)