Changyou.com, a former branch of Sohu, also reported mixed third-quarter earnings. The online game developer reported earnings of $1.37 a share on revenue of $183.1 million. Analysts surveyed by Yahoo! Finance had expected earnings of $1.36 on $183.35 million in revenue.
For the fourth quarter, the company reported an unexpectedly gloomy forecast of between 34 cents to 41 cents, compared to analysts' consensus of $1.39 a share. Revenue was higher than hoped for, in the range of $193 million to $199 million compared to analyst expectations of $190.25 million.
"In the fourth quarter, we will significantly ramp up our marketing investment to promote our line-up of new games, mobile applications and other Internet products in both China and overseas, so as to further expand our user base," said CFO Alex Ho in a statement. Significantly more expensive investments in the quarter could explain the earnings shortfall.
Shares were 20.2% lower to $28.50 by market close, and 2.7 million shares had changed hands compared to the three-month average daily trading volume of 337,300.
TheStreet Ratings team rates Changyou.com LTD as a Buy with a ratings score of B. The team has this to say about their recommendation:
"We rate Changyou.com LTD (CYOU) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, growth in earnings per share, attractive valuation levels and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
- You can view the full analysis from the report here: CYOU Ratings Report