Changyou.com Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese online gaming specialist Changyou.com (NAS: CYOU) look like they lost a bet today, falling as much as 15.4% amid heavy trading.

So what: The only partly spun-off gaming arm of Rule BreakerSohu.com (NAS: SOHU) just reported second-quarter results, and investors didn't like what they saw. At $105 million, sales trounced management's guidance by 5%, and $1.04 of non-GAAP earnings per depositary share also beat official projections by about 10%, so the raw numbers were clearly no cause for concern. In the upcoming quarter, management sees sales far ahead of Wall Street estimates, but predicts earnings a bit below consensus.

Now what: Changyou shares have gained some 130% since hitting the IPO trail a little more than two years ago, so it's understandable if investors are skittish over results. Increasing competition from Baidu.com (NAS: BIDU) and Sina (NAS: SINA) doesn't soothe shareholders' nerves, either. But all things considered, you're looking at a mighty fast grower that trades for less than seven times trailing earnings, and online business is still in its infancy in China. You can't go far wrong by buying Changyou on this dip.

Interested in more info on Changyou.com? Add it to your watchlist.

At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies discussed here. Motley Fool newsletter services have recommended buying shares of Baidu, Sina, and Sohu.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

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