Qihoo 360 Technology Is Set to Get Better After a Solid First Quarter

Focus on PC and mobile has allowed Qihoo to sink its teeth into the Chinese Internet market.

Jul 7, 2014 at 1:00PM

Chinese Internet company Qihoo 360 Technology (NYSE:QIHU) has beaten rival Baidu (NASDAQ:BIDU) and the broader market in terms of stock price appreciation so far this year. Qihoo is up into the early teens, and if its first-quarter results are any indication, the company looks set for explosive growth.

Terrific results
Qihoo 360 reported solid results for the first quarter, with both revenue and earnings beating Street expectations. The strong performance was driven by robust growth in PC and mobile games, along with a considerable increase in advertising revenue. In fact, Qihoo's first-quarter earnings growth outperformed some of its rivals such as JD.com, Sina, and Weibo, which didn't perform well and reported losses.  

Qihoo's revenue for the quarter increased approximately 141% year over year to $265 million, beating the consensus estimate of $228.2 million . Also, its earnings of $0.54  per share were significantly more than analysts' expectations of $0.34 per share. Qihoo's guidance was also strong. For the second quarter, the company anticipates revenue in the range of $300 million-$305 million, more than the consensus expectation of $270.18 million .

Growth-centered strategies
Qihoo is undertaking a number of moves to unseat rival Baidu from the perch of the Chinese Internet industry. No doubt, its efforts are resulting in solid growth, which is expected to continue in the future.

First-quarter results were indeed good, and reflect how the company is progressing. Qihoo continues to strengthen its position in mobile security and apps. According to statistics, the user base for 360 Mobile Safe has doubled in the past year. Moreover, the company has launched a brand new mobile browser, along with a new mobile search app, which should further strengthen its position.

In spite of tough competition, Qihoo's 360 Mobile Assistant is attracting users at a rapid pace. According to management, "Mobile monetization is an important part of all our overall business strategy and expects this trend to continue to build into the coming quarters." Additionally, the company is making huge strides in the search market; in just two years, Qihoo has taken 25% of the search-traffic in China. Moreover, Qihoo is seeing solid growth in its gaming segment, which continues to attract developers and users.

Advertising growth
Advertising is one of the company's key growth drivers. In fact, its advertising revenue was up 121% year over year. This performance was driven by strong search monetization and the expansion of performance-based advertising on its personal start-up page. To boost its advertising business, Qihoo announced the acquisition of MediaV, a leading precision advertising and digital marketing platform in China.

MediaV provides cloud-based analytics services that allow clients to deliver advertising to targeted audiences. Analysts from Morgan Stanley expect MediaV to build an advertising exchange platform, which will improve its advertising efficiency. Consequently, Qihoo expects MediaV to increase revenue by 5%-10% in 2014. 

Going forward, Qihoo will continue to strengthen its brand in security and mobile by making strategic investments in key areas. This will enhance its monetization network in product development and technology innovation, which will further expand its coverage of PC and mobile Internet, along with cloud-based services. Management believes its new products and services will be of great help in a tough and competitive market, especially against Baidu.

Baidu's moves
Baidu is strengthening its search business by focusing on targeted ads. The company believes that this will help it drive better returns for customers and deliver a better experience to users. Mobile is turning out to be a strong growth area for Baidu. It is seeing an increase in the percentage of customers with mobile-optimized landing pages. Additionally, the percentage of revenue Baidu receives from mobile landing pages is improving as a result of a better landing page quality. 

Driven by its product development, Baidu has managed to increase its daily active mobile search users from 130 million a couple of quarters ago to 160 million in the previous quarter. So, it is important for Qihoo to continue innovating to provide stiff competition for Baidu.

The bottom line
After a solid performance in the previous quarter, Qihoo looks set to improve. The company is focusing on both mobile and PC to profit from the fast-growing Chinese Internet market. It has established a strong position, despite the presence of bigger rivals such as Baidu, and its strategies indicate that it should continue getting better

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Mukesh Baghel has no position in any stocks mentioned. The Motley Fool recommends Apple and Baidu. The Motley Fool owns shares of Apple and 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers