Sohu.com, Inc.
Thesis
Sohu.com is undervalued due to its significant cash reserves and ownership stake in its gaming subsidiary, Changyou. The market is pricing the non-gaming business at an extremely low multiple, suggesting that investors are paying only a fraction for its popular internet properties and advertising business. With a target price of $67 based on DCF analysis, there is substantial upside potential from current levels.
Did it work?
The long thesis anticipated substantial upside to a $67 target based on Sohu's cash reserves, Changyou stake, and undervalued non-gaming assets. Instead, over 16.5 years the stock declined 70.9%, the opposite of the predicted outcome, indicating the market never re-rated the hidden value as the thesis expected. With far more time elapsed than any reasonable DCF horizon and a deeply negative return, the thesis is decisively broken.