Sohu.com Inc.
Thesis
The market underestimates SOHU's value by focusing on the risks of its free-to-play online gaming business and its reliance on a single hit game. By subtracting the value of its 66% stake in Changyou and its cash reserves, we find that we are effectively paying only $107 million for SOHU's other internet properties and businesses. This presents a significant upside potential, making SOHU a compelling investment opportunity at a value price.
Did it work?
The long thesis on SOHU has failed as the stock has declined by 72.1% over the elapsed period of 198 months. The significant drop in price indicates that the market did not recognize the value proposition outlined in the pitch, and the risks associated with its gaming business have likely materialized. This performance starkly contrasts with the expectation of upside potential, leading to a clear conclusion that the investment thesis did not hold.
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