Sohu.com for Chinese growth
I’ve been following Chinese stocks more closely ever since the market meltdown last fall. Sohu.com has reached my target list after falling from its peaks and now to a respectable valuation even with a very strong growth rate. Sohu.com is growing quickly, has a marketplace with plenty of organic growth and will make more money as China transitions from central planning to free market capitalism.
There are several things that I like about Sohu.com:
China’s internet usage is growing.
This is one of the biggest factors behind why I like Sohu.com. Even with poor management, it would be difficult not to produce amazing growth simply because the rates at which Chinese citizens are moving to the web. The more people surfing, the bigger the market and the more it can make for its advertising. Natural growth will continue to feed Sohu.com for many more years, at which point it will take more to push this company to the top.
Chinese consumers are buying more.
As Chinese consumers spend more both online and offline they become bigger targets for advertising dollars. More money in consumer products means higher prices for advertising on portals like Sohu.com. The growing middle class in China is making consumer goods like cell phones and personal computers an absolute staple, even though they were considered luxuries just a few years prior. Higher prices for advertising also push up earnings growth, that’s a win-win.
It‘s cheap
Sohu.com is incredibly cheap. Compare it’s PEG ratio to Googles and Sohu.com is undervalued by at least 33%. Even though its not the market giant of Google, Sohu.com is far undervalued as a business and what kind of profits it will be pushing even just a few years from now. The heyday for Sohu.com has yet to come, other internet businesses have grown to their max while Sohu is riding the Chinese and internet boom to the top.