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Is Qihoo 360 a Buy Despite Rich Valuations?

July 26, 2014 | About:

Qihoo 360 Technology (QIHU) has made quick advancement in the Chinese Internet industry. The organization is currently giving hardened rivalry to Baidu (NASDAQ:BIDU), taking without end piece of the pie and rubbing shoulders with Tencent (TCEHY) in the gaming market also. Looking forward, will Qihoo have the capacity to manage its spectacular execution, or will it wind up vanquished by greater associates?

Qihoo is developing at a quick pace; in the final quarter, revenue expanded 115% year-over-year to $221.6 million, agreeably beating analysts' estimate of $209 million. Furthermore, Qihoo's earnings additionally expanded an eye-popping 218% year-over-year to $0.70 for every offer, outpacing agreement estimates of $0.43 for every offer.

Strength checks

Qihoo's prosperity is a consequence of the organization's cement steps to fortify its mobile security and mobile application store items. With its PC-based active users arriving at 475 million, Qihoo delights in a predominant position in the Chinese Internet industry. Besides, 70% of China's active PC Internet users utilize Qihoo's PC program. What's more, Qihoo is the pioneer in cell phone security in China with 70% piece of the overall industry.

Going ahead, Qihoo expects its heading position in Android-based application appropriation in China to drive results. Qihoo heads with more than 40% of the business in its sack. Further, the organization's search motor is seeing significant activity additions, having hit a piece of the pie of 23% at the end of 2013.

This is an enormous accomplishment for the organization since Baidu was the predominant player in the search business in China at one purpose of time. Last May, Baidu summoned 70% of the search showcase in China. In any case, that metric has diminished to 58% now, as per Chinese research firm CNZZ. Going ahead, Qihoo is resolved to narrowing the hole with Baidu further by attaining 35% offer of the Chinese search showcase before the end of 2014. Moreover, the organization has effectively dispatched a couple of mobile search related items to enhance its position on this stage too.

Gaming development

Then again, Qihoo's diversion stage is additionally pulling in amusement designers and users in great numbers. Qihoo runs about 800 games on its diversion stage and is including supporters at a better than average pace. At the end of the final quarter, Qihoo had about 700,000 paying gaming records contrasted with 560,000 in the former quarter. Going ahead, as the Chinese gaming business sector is relied upon to develop at a quick rate, Qihoo ought to see further upgrades in this metric.

Nonetheless, Qihoo need to conquer the titan Tencent in an offer to make its stamp on the Chinese gaming industry. Tencent is the greatest diversion administrator in China. In what would appear to be a wonderful certainty, Tencent is the world's greatest organization regarding amusement related revenue, as indicated by research firm Newzoo.

Tencent's QQ Games gateway has been a huge achievement, and now the organization is expanding its arrive at through its famous Wechat informing administration. The Wechat customer additionally circulates computerized games and has 300 million enrolled users in China. Thus, Tencent has a solid hold in the Chinese gaming industry, which Qihoo will need to overcome on the off chance that it is to make genuine advancement later on.


Traditionalist investors may now like Qihoo in the wake of taking a gander at its trailing P/E of 114, which shows up profoundly exaggerated. Nonetheless, the forward P/E of 23 is very sensible and demonstrates quick earnings development. Qihoo has conveyed strong earnings development in the past and, provided for its developing predominance in the Chinese Internet industry, the streak could extremely well proceed later on. In this way, taking a gander at its development rate, investors ought wouldn't fret paying a premium for the organization.

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