Sogou, Changyou Follow the Downward Trend of Asia Stocks

The stocks in both subsidiaries fell significantly on lower-than-expected financial results, further weighted by the U.S.-China trade tensions.

Author: Belinda Zhou   

The stocks in Sogou Inc. (NYSE: SOGO) and Ltd. (Nasdaq: CYOU), two subsidiaries of Ltd. (Nasdaq: SOHU), both tumbled Monday, following the downward trend of U.S.-listed Chinese ADSs on worsened trade tensions and lower-than-expected financial results.

Shares in Sogou dropped 12 percent to $3.39 per ADS.

Sogou, a search engine in China, said in a statement today that its second-quarter revenue climbed a disappointing 1 percent year-over-year to $303.6 million. Its net income reached $21.3 million, or 5 cents per American depositary share, down 36 percent, compared with income of $33.2 million, or 7 cents per ADS, in the corresponding period of 2018. 

"Search revenues continued to grow faster than the industry average. At the same time, by leveraging the large user bases for both search and mobile keyboard, we have gradually built up our big data and recommendation service at a company level and are focusing on unlocking its commercial value," Xiaochuan Wang, the chief executive officer of Sogou, said in the report.

The company highlighted that its key business, Sogou Mobile Keyboard, had 453 million daily average users, at a year-over-year increase of 17 percent, which it claimed was China's largest voice app with up to 680 million daily voice requests.

"We also geared up our efforts to drive innovation in language-centric AI technologies and continued to advance our leadership in voice and computer vision," Wang added.

For the third quarter this year, Sogou said it expects total revenues to be in the range of between $304 million and $314 million, representing a 10 to 14 percent increase year-over-year.

Another subsidiary of Sohu, online game provider Changyou, saw a decline of 14 percent to $6.45 apiece in trading Monday.

The company announced that its total revenue was $119 million in the second quarter through June with an increase of 5 percent year-over-year. Its net income was cut in half to $16 million, or 30 cents per ADS, compared with $32 million, or 60 cents per ADS, in the same quarter of 2018.

Revenue from Changyou's key online games was $102 million, with the year-over-year increase of 8 percent, which the company said exceeded its expectations.

"During the quarter, our personal computer game business performed well as revenue increases from several legacy PC games helped to offset a decline in revenues from TLBB PC," Dewen Chen, the chief executive officer of Changyou, said in the statement today.

Changyou, which operates multiplayer online games in China and provides ad services, was spun off from and became public in 2009. The company is a leading developer and operator of online games in China with a diverse portfolio of popular online games. 

Looking ahead, Changyou said it expects its total revenue to be between $90 million and $100 million in the third quarter, including online game revenue of $80 million to $90 million. It also said it hopes to achieve net income of between $22 million and $27 million, or between 41 cents and 50 cents per fully-diluted ADS.