Sohu.com (SOHU) Hits 52 Week Low: What's Pulling It Down?

Shares of Sohu.com Inc. (NASDAQ:SOHU) tumbled to a 52-week low of $37.81 during yesterday’s trading session. Shares of this China-based Internet portal, however, recovered marginally to close the trading session at $38.58.

The company, yesterday, backed off from its earlier proposal of a $600 million equity and debt investment. In Dec 2015, the company’s CEO, Charles Zhang had proposed the formation of a “special purpose entity” through which the group planned to repurchase shares and notes of the company. However, the company has now revealed that it “will seek and consider alternative financing options for the company”, which disappointed investors.

But it is also important to note that the company has been going through tough times since it reported its first quarter 2016 results in April. Though the reported loss was lower than expected, sales declined year over year, thereby raising concerns for long-term growth.

The company’s business has been impacted by uncertain macroeconomic conditions in China, in addition to persisting sluggishness in its brand advertising business. Furthermore, the company has been cutting down its spending levels, which will make market share gain more difficult in the near term due to stiffening competition from peers. On the other hand, it is necessary for the company to continue investments in product development to drive growth, which will also weigh on its financials in the near term.

Nonetheless, the company’s strength in search, online video and mobile businesses is a positive. The online gaming business also has some decent growth potential.

Sohu has a Zacks Rank #4 (Sell) at present. Better-ranked stocks in the broader technology space include Facebook, Inc. (NASDAQ:FB) , EarthLink Holdings Corp. (NASDAQ:ELNK) and CommVault Systems, Inc. (NASDAQ:CVLT) , each sporting a Zacks Rank #1 (Strong Buy).