Qihoo 360 Technology (QIHU) is one of the hottest Chinese Internet stocks. The company has gained 13% this year, and its last-reported results indicate that it is primed for further gains. Let's take a closer look at its results and see how it might perform in the future.
Qihoo 360 Technology reported quarterly results that beat analyst expectations and offered a strong outlook for its second-quarter. First quarter revenue came in at $265 million (organically $248 million), well ahead of the consensus estimate of $228 million, mainly driven by games, which were up 191% year-over-year. Second quarter guidance of 98%-101% top-line growth (versus consensus of 78%) is impressive. Looking forward to the second quarter, Qihoo expects revenue of $300 million to $305 million, above analysts' estimates of $270.18 million for the quarter.
Qihoo 360 Technology reported non-GAAP EPS above consensus estimates. It improved its earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago.
The way forward
Qihoo's game platform is attracting game developers and user activities under one scheme. It’s pleased with the overall market and achieved robust growth in the strong game season. Its Android app store, 360 Mobile Assistant attracted the users at a rapid pace and continued to be clear leader in this market despite of the rapidly changing competitive landscape. It made significant progress in monetizing its mobile app store through both advertising and mobile game during the first quarter.
Total monthly active users of Qihoo 360's PC-based products and services reached a record 479 million compared to 475 million a year ago. User penetration of its PC-based products was 93.3% compared to 95.8% a year ago.
Monthly active users for PC browser of Qihoo were 339 million compared to 332 million a year ago. User penetration of 360 PC Browsers reduced to approximately 66% as against 70% a year ago.
Average daily unique visitors to 360 Personal Start-up Page and its sub pages increased to 122 million in the quarter, compared to 94 million a year ago. Average daily clicks on 360 Personal Start-up Page and its sub pages also jumped to 772 million, compared to 489 million a year ago. The total number of games reached approximately 1 million compared to 700,000 in the prior quarter.
The impressive guidance reflects management’s confidence in further monetization improvement on desktop search and mobile games. Mobile games segment outperformed the industry reflecting a favorable competitive position for the QIHU mobile app distribution platform-360 Assistant.
Going forward, Qihoo plans to launch several mobile search related products to leverage the huge traffic to its app distribution platform. The company’s large user base and strong technology capability are converging well for Qihoo mobile search in the longer term. Management remains confident about the company’s business momentum across its business segments, and sees multiple drivers over the near to long term, including search market share gains, mobile games, mobile app distribution traffic monetization.
The trailing P/E and forward P/E ratios of 77.27 and 21.66, respectively, indicate successful cost cutting efforts by the company. The PEG ratio of 0.85 is very impressive and way above the industry’s average of 1.20. The profit margin of 17.33% is also strong. A healthy current ratio of 3.30 supports the growth figure. Therefore, investors are strongly advised to invest in the growth story, further illustrated by the CAGR for the next 5 years of 40.20%, much above the industry’s average of 18.56%, and expect fruitful returns in the long-run.