Charles Zhang
Long/short equity, value, special situations, contrarian

Changyou's Platform Ambition; Apple's Inevitable Decline

Changyou (NASDAQ:CYOU) reported its Q3 earnings on October 28th and its stock has fallen 23% on concerns related to its margin guidance. Some analysts believed that Changyou's margin is weakening and its business must be bad. They got it wrong - lower margin is to fuel future growth. Changyou finished its five-year plan and chose to utilize its large cash pile to expand further into mobile gaming and platform business. The company planned an incremental $53 million marketing and R&D push to roll out new mobile games and build its platform during the 4th quarter. It's currently trading at 3.2x P/E (ttm, ex-cash). At the current price level, not only the market values its 17173 portal and mobile...

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