Focus Will Be On The Launch Timing For CYOU’s DMD

Analysts at Goldman Sachs maintain their "neutral" rating on Changyou.com

. Changyou has reported its Q2 EPS in-line with the estimates. According to Goldman, “CYOU finished 2Q with net cash of $295mn, up $30mn qoq despite operating cash inflow of $49mn which we attribute to the I.C.E. Entertainment acquisition (Shanghai-based online game company) which closed in May 2010.” The analysts add, “(1) We attribute strong qoq growth in APA and peak concurrent users (PCU, up 25% qoq to 1.14 mn) primarily to successful TLBB2 expansion pack launched in April, and some PCU contribution from Chinese Hero which began open beta testing on May 20. (2) We believe the qoq ARPU decline was likely due to dilution from lower-ARPU new TLBB gamers and lower ARPU of new games. (3) We are at the high end of 3Q revenue and earnings guidance which we believe looks reasonable given CYOU’s track record of reaching or exceeding the high end of its guidance range. Our 3Q estimates reflect minimal contribution from Duke of Mountain Deer (DMD) which we modeled to be launched in Sept. Key focus for CYOU’s earnings call will be guidance on DMD launch given recent newsflow of possible delays.”