Sohu (SOHU) is a leading Internet portal in China (similar to Yahoo (YHOO)). They also havevery popular online games that helped them report huge earnings two weeks ago (see conference call transcript). Revenues surged 156% and earnings exploded by 256% last quarter. They have beat analysts estimates by an increasing percentage each of the last 4 quarters (I can’t remember ever seeing that). The trend is that they have beat estimates by 15%, 19%, 25% and 48% over the last 4 quarters.
This indicates that analysts still do not have a full understanding of how fast they are growing.
SOHU is the official online sponsor of the 2008 Olympics in Beijing. This could become the next Baidu (BIDU) type stock ($90 to $300 in 6 months) - at least that is what is starting to crystallize in my head.
What I like is about SOHU is that it is still relatively small, with just a $3 billion market cap (in comparison, Baidu is $12 billion). I now think SOHU can get to $5-6 billion market cap pretty easily, especially with them on track to make $3.35 next year (PE is very cheap at just 24x earnings). Put a 45x PE on next year's earnings estimate (still way too low in my opinion) and you get $150 stock. In comparison, BIDU sells at 55x 2009 earnings and a whopping 16x revenues, so there is reason to believe that SOHU can get a much higher valuation.
I visualize Sohu galloping higher day after day as multiple growth funds continue to build a position of hundreds of thousands of shares each.
Disclosure: I like the stock and have made the Decemeber $135 calls a new POWER PLAY.