UPDATE: Goldman Sachs Downgrades Changyou.com to Neutral

Goldman Sachs lowers its rating on Changyou.com

to Neutral from Buy and cuts its price target from $45 to $28 a share as investments weigh on margins. Goldman Sachs notes, "The stock is down 6% since we upgraded to Buy on Oct 20, 2011, versus MSCI China +20% (12 months -33% vs. index -11%), due to poor game growth and margins. Although lead game TLBB has maintained steady performance, we expect slower growth trends, combined with significant investments as Changyou invests to diversify (social/web games, 17173), to depress margins and earnings over 2012 and possibly 2013. We are unable to recommend investors to buy the stock until we gain confidence in potential returns of investments, or faster game growth from DMD or MMOs in 2012 pipeline." CYOU closed at $25.31 a share on Monday.