Qihoo 360 (QIHU)
Qihoo 360 (QIHU): Could have lots of upside
By Michael Cintolo, Chief Analyst, Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 9/26/13 Sign up for free Cabot Wealth Advisory
You should follow the action of the stock, and not the opinions, fears or hopes of pundits because that’s the only way you’ll ever develop a bigger winner. It’s a fact that every big winner has many shakeouts, pullbacks, corrections, base-building efforts and, yes, the occasional stinker of an earnings reaction. If you’re investing solely by feel, you’ll never hold on through all that turmoil. And if you do, you’ll probably also hold on for months after the stock has topped!
A classic example of this has been Qihoo 360 (QIHU), a name that began acting all hunky back in May. After the market’s correction ended in late June, I added it to the Cabot Market Letter’s Model Portfolio. The company is a leading provider of anti-virus software to nearly all of the PCs in China, as well as a leading provider of mobile security software for smartphones. And it also operates an app stores that’s very popular with many mobile game users (revenue from that segment shot ahead 181% last quarter, FYI).
But what really has investors excited is the company’s move into the paid-search market—Qihoo has a very popular Web browser, with millions of Chinese using its 360 website as their home page. So the company decided to build its own search service—and it’s been a huge success! From nothing 18 months ago, Qihoo has garnered about 17% of the Chinese search industry. To this point, Qihoo's revenues from paid-search are slow (less than 1% of the industry total), but that’s sure to mushroom as the company continues to gain share.
However, all of this stuff is known now, while at our buy in early July, it was not. And there were plenty of risks. Baidu, the Google of China, certainly wasn’t going away; that company made a big splash by purchasing the second largest app store in China a couple of months ago. Just a few weeks ago, Tencent, a gigantic Chinese online outfit, bought a big chunk of Sohu.com’s search engine, promising greater competition in the industry. And Qihoo itself sold $500 million of convertible bonds in late August.
I’m sure these developments scared out many investors during the past few months; I know I got my share of phone calls and emails asking if it was time to cut and run. But QIHU has absorbed all of them in fine fashion—it hasn’t even closed below its shorter-term 25-day moving average since June, rallying from 48 at our buy to nearly 95 in 10 weeks! In fairness, the Tencent acquisition did cause a quick shakeout in the stock (from 94 to 81 in just four days), but it’s held up well since then.
While I don’t advise jumping in with both feet at this time, I do think you could start a small position (say, half of what you’d normally buy, dollar-wise) in QIHU with a loose loss limit of 15% or so. Then, if the stock can power ahead in the coming weeks, you can keep nibbling on the way up. If this story plays out, I think the stock could still have lots of upside ... regardless of the news and rumors that float around.
To get further updates on QIHU and additional strong stocks with high growth potential in the months ahead, click here now.
By Timothy Lutts, Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 8/8/13 Sign up for free Cabot Wealth Advisory
Qihoo 360 Technology (QIHU) is a late entrant to the Chinese browser/search business, but it’s gaining market share fast and earnings are expected to boom in the quarters ahead. Here’s some of what Paul Goodwin, editor of Cabot China & Emerging Markets Report, wrote in June.
“Qihoo 360 is still young (incorporated in 2005) and small (annual sales of $370 million). But its history provides a great illustration of how success can show up at your back door while you’re out by the front door waiting for a package. Qihoo 360’s front door, the signature product that they expected to be the main revenue source, was its anti-virus software for mobile devices … Qihoo has penetration of between 80% and 90% of the security market.
“But the success that has come in the back door for Qihoo 360 is based on the company’s very popular open mobile browsers, 360 Safe Browser and 360 Speed Browser. At the end of Q1, these browsers had 332 million monthly active users (up from 172 million in January 2011) and a penetration rate of 70% in China. Qihoo monetized its browsers’ popularity with the familiar model of display ads and over 280,000 paying users of its game platform, up from 139,000 two years ago.
“In August 2012, Qihoo inaugurated its own mobile search service on its browsers, and shocked the world by suddenly owning about 10% of the mobile search traffic in China. The suspicion at the time was that Qihoo was stealing market share from Baidu, but subsequent analysis showed that the jump in usage came primarily from former Google users.
“Wherever the new users came from, the new search business allowed Qihoo to begin offering sales of search term-based ads to businesses, very much on the Google model…Annual revenue in 2012 was $329 million, and analysts expect 2013 revenue to come in around $588 million…Qihoo 360 is a big story and 2013 is likely to see substantial revenue increases from its new search-term service.”
Technically, the chart is encouraging. After coming public in March 2011, QIHU entered into a long bowl formation, bottoming at 14 in 2012 and breaking out to new highs in May of this year. The stock is up 80% since then, reflecting growing sponsorship by both traders and investors. So the future is bright. But short-term risk is substantial, with the 50-day moving average down at 52 and the company’s earnings announcement out soon (though the date is unknown.)
With the potential to be China’s leading browser/search platform, QIHU is tempting, but it’s not for beginners. If you’d feel comfortable with a little less risk and a little more handholding, I recommend my own service Cabot Stock of the Month.
By Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 6/6/13 Sign up for free Cabot Wealth Advisory
The market is finally taking a breather after a terrific advance in recent months. Indeed, for the first time since the mid-November low, I’m seeing some real fatigue in the market and many sectors—anything interest rate-sensitive has been crushed, and most stocks have joined in on the downside this week.
It’s not the end of the world, and I’m not going to predict exactly how deep this retreat will be or how long it will last. I do think there’s a chance the market can hold up around these levels, but as I wrote in both Cabot Market Letter and Cabot Top Ten Trader this week, I believe there’s been enough evidence to take a couple of steps back and see what comes.
That means I’ve pared back buying, raised some cash and I’m watching my stocks closely. It also means I’m focused on building a watch list of stocks that are holding up well.
One neat trick (albeit very short-term in nature) is to look for leading stocks that have formed higher lows during the past couple of weeks, even as the S&P 500 and other indexes have etched lower lows. It’s not any type of buy signal, but it is a heads-up of emerging resilience.
One such stock I’m watching closely is Qihoo 360 (QIHU), a Chinese company that’s making inroads into that country’s search market. It’s a market I’m familiar with from our investment in Baidu from 2009 through 2011—it was a huge winner for us because it basically had the market to itself.
Now, though, Baidu is struggling; growth has vanished (earnings are projected to be flat this year) and the stock is acting horribly, now below 100 compared to its all-time peak of 166 in July 2011. I don’t think that stock is heading to zero, but its best days are likely behind it.
And one reason is Qihoo, which has always done a good advertising business by having very popular Web browsers (used by a whopping 332 million people in March 2013, up from 273 million a year ago) and by having a huge audience for its 360 Start Up page (94 million in March, up from 77 million last year).
But in recent months, Qihoo’s been developing its own search platform and taking share rapidly—on average, 1% of market share per month. And the company is just now starting to monetize those efforts—search made up just 5% of revenue last quarter but most analysts see it possibly doubling in the second quarter and expanding quickly beyond that. Plus, the company, which runs the large Android app store in China, is seeing its mobile gaming business boom--up 119% in the recent quarter.
Put all of that together and management came out with a very bullish forecast for the second quarter: while revenues have grown 77%, 65% and 59% during the past three quarters, it expects the current quarter to produce 95% growth. Analysts see earnings up 31% this year and 60% in 2014, but we think those could prove conservative if the search business really takes off.
As for the chart, QIHU came public in March 2011 and was a big nothing through the middle of last year when it made its search efforts known. The stock boomed on that news, and then chopped its way higher in the months that followed. Then, after a three-month pause just below its IPO price, the stock broke out powerfully on the upside last month, running up more than 20% in just two weeks.
Moreover, despite a shakeout during the market’s initial wobbles two weeks ago, QIHU remained in good shape. This is still a relatively speculative stock (just 130 mutual funds own shares), but it seems to be “growing up” (attracting new sponsors) and could be a follow-on opportunity to Baidu, should it continue to take market share in search. You could nibble here, but I’ll just keep it near the top of my own watch list.
By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 3/5/13 Sign up for free Cabot Wealth Advisory e-newsletter
Tonight, after the market closes, Qihoo 360 (QIHU), whose stock is in the portfolio of the Cabot China & Emerging Markets Report will be reporting Q4 results.
Qihoo 360 is a Chinese company that makes security software for mobile devices and operates a popular mobile website that made headlines last summer by grabbing 10% of Chinese mobile search traffic. QIHU has been rallying for five days, nearing its post-IPO peak of 36.2 from April 2011.
The all-important consensus numbers for QIHU are $93.68 million in estimates for quarterly revenue and 17 cents per share in earnings. That’s the bar that investors expect Qihoo 360’s results to jump over.
At Cabot, we always say that what’s important isn’t so much the numbers in a quarterly report as it is the reaction to those numbers. And that reaction will be quite evident tomorrow.
Click here for more information on Cabot China & Emerging Markets Report.
Qihoo 360 (QIHU): A huge opportunity
By Paul Goodwin, Editor of Cabot China & Emerging Markets report
From Cabot Wealth Advisory 2/26/13 Sign up for free Cabot Wealth Advisory e-newsletter
My stock pick today is one that I’ve written about before, Qihoo 360 (QIHU), a Chinese company that makes security software for mobile devices. Qihoo gets most of its money from selling programs that battle viruses, adware and other malware and protect personal information on phones and tablets. The company makes nearly three-quarters of its money from ads on its mobile Web browser and the other quarter from its protection software.
The boom in mobile devices in China has lifted Qihoo 360’s market cap to $3.6 billion on annual revenue of just $288 million, and the reason is that many investors see the company’s rapid market-share growth in Internet search as a huge opportunity.
QIHU popped higher in August 2012 when it switched from Google as the default search engine to its own search program on its popular mobile browser. The sudden acquisition of a nearly 10% market share (mostly taken from Google) grabbed lots of attention and kicked the stock from 15 at the beginning of August 2012 to 25 on August 22. Another surge started in late December and the stock surged to 33. But since the beginning of January, QIHU has traded in a range with support at 30 and resistance at 33. This kind of range-bound trading usually indicates a battle between buyers and sellers, and it will probably come down to the results of the company’s quarterly report on March 5 to decide the contest.
Right now, Qihoo 360 is one of a number of small Chinese stocks that are making investors look more closely at the China market. After years of global economic turmoil, the big emerging markets are once again tempting targets, with GDP growth that dwarfs anything in the developed West and economies that are ready to explode higher when the woes in Europe finally resolve themselves.
If you want in on the ground floor of this resurgence in the fastest-growing economies in the world, you might consider taking a trial subscription to Cabot China & Emerging Markets Report, which I write with my own hands. I think you’ll enjoy the results. More on Cabot China & Emerging Markets Report.
By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 10/16/12 Sign up for free Cabot Wealth Advisory e-newsletter
A battle between a minnow and a shark isn't much to get excited about; the minnow just doesn't have the teeth. But a battle between a shark and a whale, now that's the stuff of legend.
The shark I have in mind is Qihoo 360 Technology (QIHU), a Chinese mobile security company that also has a popular Web browser. Qihoo is a small, lively company with a market cap of $2.6 billion. This year, the company rolled out a new search engine aimed at mobile browser customers.
The whale is Baidu (BIDU), the dominant search engine provider in China, which has a market cap of just over $40 billion plus (a few months ago) 80% of the Chinese search market and 488,000 active online marketing customers.
Despite Baidu's size and dominant position, Qihoo isn't an ignorable competitor. Its 272 million monthly browser users are a huge resource, and enough of them are already clicking the Qihoo button on that browser (instead of the Baidu or Google buttons) that both Baidu and Google have lost market share. Some estimates are that Qihoo has taken a little under 10% of mobile search traffic, with Baidu and Google both losing.
The dent in Baidu's market share showed up in BIDU's steep dip in August, as well as QIHU's big rally.
There are lots of imponderables in this shark vs. whale battle. The search quality is about the same for both Baidu and Qihoo. Baidu has the resources to fight back by improving its mobile product. Qihoo will need to put lots of money into improving its ancillary services (maps, music service, etc.) if it wants to take a bigger bite out of Baidu.
Right now, I'd say Qihoo 360 is a great candidate for your watch list. The stock is tightening up its trading range as it digests its August spring from 14 to 25. You can't count either player out, but great conflicts make for interesting investing.
From Cabot Wealth Advisory 2/27/12 Sign up for free Cabot Wealth Advisory e-newsletter
Both the Internet and mobile communication services are spreading across China at a much higher rate than in the developed West, and that rampant growth has provided a perfect environment for the growth of malicious software. Qihoo 360 (QIHU) is a young Chinese company that is that country's leader in anti-virus software and other applications. The company's website offers one-stop-shopping for third-party software that protects against viruses, trojan horses, worms, adware and other malware, including apps that protect against theft of personal information from mobile devices.
There are other sources of revenue, including Internet value-added services and online advertising. But with its monthly subscription revenue base, security looks like it has the biggest potential to provide a predictable stream.
Qihoo (pronounced "chee-hoo") has been public only since late March, and has been correcting slowly after an IPO that saw the stock's price leap from 14.5 to 36 during its first week.
That kind of high-volume rocket launch is difficult to maintain during a problematic market, and the broad-market woes of summer took a big bite out of QIHU, dropping it to 16 in June, then 14 in early October. At this point, QIHU settled down a bit and traded mostly in a range with resistance at 20 and support at 15 from October through February 21.
The interesting action came on February 23 and 24, when QIHU jumped on significantly heavier-than-average volume after its Q4 earnings report on February 23.
QIHU has had its big IPO pop, has had its post-IPO swoon to below its IPO price and has put in its post-IPO base. It looks like the stock is ready to begin adult life. I think it's a great story, and it looks buyable on a breakout above that resistance at 20.
For other fascinating, high-potential emerging market stocks like Qihoo 360, you might want to check out Cabot China & Emerging Markets Report (which I write). Emerging markets include the fastest-growing economies on the planet, and I follow every emerging market stock that trades on U.S. exchanges. It's where the action is.
|Qihoo 360 Technology (QIHU)
Block 1 Area D
Huitong Times Plaza
Beijing, 100025 China
86 10 5878 1000
|Index Membership: N/A
Industry: Internet Service Providers
Full Time Employees: N/A
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2/26/13 Qihoo 360 (QIHU): A huge opportunity
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2/27/12 Qihoo 360 (QIHU): China's leader in anti-virus software