Qihoo 360 Isn't a Threat to Baidu Just Yet

Qihoo 360 serves up another blowout quarter.

May 28, 2014 at 5:00PM

Betting against Qihoo 360 (NYSE:QIHU) isn't a smart wager. The company behind China's leading Internet browser and security software suite opened higher this morning after posting better than expected quarterly results last night.

It was pretty spectacular. Revenue soared 141% to $265.1 million, and adjusted earnings more than quadrupled to $73.3 million, or $0.54 per ADS. Analysts were only holding out for net income of $0.34 per ADS on just $228.1 million in revenue, but is that really a surprise? Qihoo 360 has been consistently blasting through analyst profit targets with ease lately.

It hasn't even been close. We're talking about beats of 27% or more over the past year alone.


EPS Estimate



Q2 2013




Q3 2013




Q4 2013




Q1 2014




Source: Thomson Reuters.

Qihoo 360 remains the category leader in online specialties, but that's not enough to explain its heady growth. Monthly active users of its PC-based products and services may have clocked in at a whopping 479 million, but that's just a 5% larger audience than it had a year earlier. Folks using its PC browsers rose by just 2%. The real growth has come from its mobile security platform where users have nearly doubled over the past year to 538 million and its Personal Start-Up Page portal where the average number of daily clicks have exploded from 489 million a year ago to 772 million clicks today.

Naturally, we can also say that search is a major part of the Qihoo 360 story. Ever since it broke into this market two summers ago, Qihoo 360 has been a gobbling up market share. Given the captive audience for its portal, browser, and security software, it's not a surprise to see folks conveniently leaning on Qihoo 360 for their search requests. This finds some traffic trackers reporting that Qihoo 360 is now accounting for a quarter of all Internet queries in China.

That's a pretty big deal, and it's something that Baidu (NASDAQ:BIDU) investors have been watching closely over the past two years. Baidu commands the lion's share of China's search market, and anything that may disrupt that deserves monitoring.

However, reality paints an entirely different portrait. After the initial fears that held Baidu's stock back when Qihoo 360 began gaining share in search, investors learned to take things in stride. The pie is getting bigger. Baidu's expanding into new revenue streams. More importantly, Qihoo 360 remains lax about monetizing its search platform, and it remains to be seen if the engine's popularity will be sustainable once its loaded with ads.

That last point is pretty important. Baidu generated $1.53 billion in revenue during the same three months that Qihoo 360 rang up just $265.1 million. That doesn't suggest 25% of the paid search market belongs to Qihoo 360, and that's with search accounting for a mere sliver of Qihoo 360's business.

Baidu investors also benefit from having the search behemoth report first. We already knew that revenue climbed 59% in its first quarter. Baidu had already told us that revenue per online marketing customer had risen 44% over the past year. It's not as if Qihoo 360's ascent in search is scaring traffic or advertisers away from Baidu.

Investors don't have to choose one over the other. "Just buy both," I argued two years ago, and both stocks have gone on to handily beat the market. It remains the smartest way to play this game where two companies can continue to win.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom, or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in explosive fashion with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 trillion industry. Click here to get the full story in this eye-opening report.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Baidu. 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.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.