Why Changyou.com Ltd (ADR) Stock Sank Monday

By Markets Fool.com

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.

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What:Shares of Changyou.com Ltd were down 10.5% as of noon Monday after the Chinese online game specialist announced mixed fourth-quarter results.

So what:Quarterly revenue jumped 19% year over year to $215.9 million -- notably including 7% growth in online game revenue to $184.4 million, and 8% growth in advertising revenue to $18.3 million -- which translated to adjusted net income of $0.25 per diluted American depositary share. Analysts, on average, were expecting slightly higher earnings of $0.29 per share on lower revenue of $210.9 million.

"I am pleased to report a quarter of solid performance," said Changyou co-CEO Carol Yu, "as demonstrated by a sustainable revenue stream from TLBB PC, a successful launch of the mobile game TLBB 3D, as well as a more cost conscious approach to our mobile Internet business."

Now what: For the current quarter, however, Changyou expects revenue between $195 million and $200 million, or below Wall Street's models for first-quarter sales of $200.1 million.

All things considered, Changyou's misses weren't that significant relative to expectations. But given its sluggish growth in the first place and with shares trading at 48 times trailing-12-month earnings, I can't blame investors for taking a step back today.

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The article Why Changyou.com Ltd (ADR) Stock Sank Monday originally appeared on Fool.com.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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 has a disclosure policy.