Sohu.com (NASDAQ: SOHU) — Deep-Value Net‑Net

1. Introduction

In this post, we consolidate our daily tracking sources, fundamental research, and management insights into a cohesive investment thesis on Sohu.com Ltd.

Sohu.com Ltd. is one of China’s earliest internet pioneers, founded in 1996 by Dr. Charles Zhang. Today, Sohu operates a diversified portfolio spanning:

• Media & Portal Services: Flagship website Sohu.com (portal, news, search) attracting over 500 million monthly active users, offering content distribution and advertising solutions.

• Online Gaming (Changyou): Wholly owned subsidiary Changyou (NASDAQ: CYOU) develops and publishes PC and mobile titles, including the long-running MMORPG "The Legend of Mir" series and the mobile spin‑off TLBB.

• Video & Community: Platforms such as Sogou Video and Sohub video-community features that enhance engagement and loyalty.

• Emerging Tech: Early-stage investments in AI-driven recommendation systems, cloud services, and international game publishing.

This breadth provides Sohu with multiple monetization streams—advertising, game subscriptions and in‑game purchases, and ancillary services—while its strong cash position and real‑estate holdings offer a deep‑value net‑net investment profile.

Our analysis draws on:

• Daily App‑Rank Monitoring via Qimai Data for TLBB Mobile performance.

• Advertising Sentiment Gauges from QuestMobile & CTR to track media-platform health.

• Deep‑Value Financial Model including SOTP, DCF, and peer multiples.

• Management & Founder Profile to assess strategic vision and execution risks.

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2. Investment Summary

Sohu trades at an EV of –USD 1.4 bn, implying a pay-to-own net cash and hard assets at a steep discount:

• Net Cash: USD 1.21 bn vs. Market Cap USD 316 m

• Real‑Estate Uplift: Four Beijing offices book at USD 253 m; market value USD 600–800 m

• Changyou Games EBIT: USD 196 m on USD 506 m revenue (39% margin)

Target Price of USD 32 is derived by applying a 60% haircut to our sum‑of‑the‑parts equity value of USD 100/ADS due to the lack of CEO willingness to sell the media business added with its strong control.

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3. Business Overview

Sohu Media Platform (2024 revenue USD 92 m; operating loss USD 306 m) via VIE structure.
Changyou Games (2024 revenue USD 506 m; EBIT USD 196 m) fully owned WFOE.

Key Risks: VIE opacity, tax contingencies, legacy media losses.

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4. Industry Context

• Online Gaming: RMB 303 bn market in 2024 (+4% YoY), mobile 76%, regulatory headwinds easing.

• Digital Advertising: Legacy portals face CPM pressure from Douyin/Kuaishou; QuestMobile & CTR indices triangulate trends.

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5. Financial Analysis & Valuation