With the Beijing 2008 Olympics sponsorship, SOHU has a well-known brand and rich website resources to leverage the great opportunities for online business in China. Overall, we think the current stock price is undervalued. Therefore, we are maintaining a Buy rating on SOHU shares.

The stock is trading at 28.6x our 2008 EPS estimate, which is lower than the industry mean. The stock is also trading at 23.3x our 2009 EPS estimate, which is far lower than the industry mean. Using a P/E multiple of 26.2x our fiscal year 2009 earnings per share estimate of $3.25 yields a target price of $85.00, which we believe reflects the company's growth prospects.

TSM Justifies its Hold Rating

Taiwan Semiconductor Manufacturing Company (TSM) is one of the world's largest pure play foundries. March top and bottom-line results met consensus estimates. The majority of excess inventory in the channel has been worked through, and management has guided weaker capital expenditures in 2008. We do not feel the move to reduce capital expenditures foreshadows weakness in the industry rather that the firm had added quite enough 90 nanometer capacity in the past several quarters. We are reiterating our Hold rating with a target price of $11.00.

Taiwan Semiconductor should continue to benefit from its dominant market position, particularly in the 130-nanometer (nm) market, which is the key revenue driver. We believe the development of the 90nm chip will drive growth over the near-term. Foundry revenue is expected to grow at a faster pace than the rest of the semiconductor industry.

Taiwan Semiconductor is currently trading at 15.2x our 2008 earnings estimate per American Depository Receipt (ADR), which is a significant discount compared to the industry median multiple. Examining its price/earnings growth ratio (PEG), we find that TSM is relatively attractive, considering our projected five-year growth rate assumption of 20% annually.

We believe TSMC's multiple can expand from here, assuming the capital expenditure decrease has more to do with the firm's execution strategy. Our implied forward multiple is 15.6x our fiscal 2008 estimate, which derives our target price of $11.00.

Werner Waits for Better Times

We are continuing our Sell on Werner Enterprises, Inc. (WERN) as the shares are expensive on a fundamental basis, but raising our target price to $20. Second quarter EPS of $0.25 was down 15% year over year, but beat the consensus by a nickel and our $0.22 estimate, due to higher-than-expected revenues. Revenues gained 9%, reflecting fuel surcharges and a stabilizing rate market.