Zacks Investment Research upgraded shares of Sohu.com Inc. (SOHU) from UNDERPERFORM to NEUTRAL on March 19, 2014, with a target price of $78.00.
Sohu reported mixed fourth-quarter results with earnings beating the Zacks Consensus Estimate while revenues missing the same. We believe that Sohu's innovative product pipeline and strong traffic growth from the search, online video, online games and mobile businesses will drive top-line growth, going forward. However, Sohu is a relatively small player in the online advertising market and continuing investments in product development are necessary to expand market share. This will keep margins under pressure in the near term. Nevertheless, the partnership with Tencent will boost Sogou's traffic, further driving Sohu's top-line growth, going ahead. Additionally, with continued organic growth, Sogou's market share in PC and mobile search will expand going forward. Thus, we upgrade our recommendation from Underperform to Neutral and set a price target of $78.00.
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