Qihoo 360 Technology Third-Quarter Earnings Preview

Qihoo 360 Technology Third-Quarter Earnings Preview

Qihoo 360 Technology Co Ltd (NYSE:QIHU), a Chinese internet services company that sells third-party anti-virus software is scheduled to report its third-quarter financial results on November 24, 2014.

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Qihoo 360 earnings estimate

Credit Suisse analysts Jialong Shi and Dick Wei suggested that Qihoo 360 Technology Co Ltd (NYSE:QIHU) will deliver better-than-expected financial results for the third-quarter.

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The analysts estimated that Qihoo 360 Technology Co Ltd (NYSE:QIHU) will post a 95% revenue growth to $366 million YoY, in line with the consensus estimate of analysts polled by Bloomberg. The company is expected to achieve a 29% increase in Non-GAAP earnings to $78 million or $0.59 per share compared with the $0.63 per share consensus estimate.

Shi and Wei suggested that Qihoo 360 Technology Co Ltd (NYSE:QIHU) will likely beat their estimate and street forecasts. In a note to investors, the analyst said, “Given potentially higher revenue and margins, the actual earnings may exceed CS and event street forecasts.”

However, the analysts believed that a simple earnings beat will not trigger a sustained stock rally.

The shares of Qihoo 360 Technology Co Ltd (NYSE:QIHU) are trading $69.63 per share, up by more than 3% at the time of this writing around 2:11 in the afternoon in New York.

Over the past 52-weeks, the shares of the company traded between $60.25 and $124.42 per share. Qihoo 360 Technology Co Ltd (NYSE:QIHU) lost more than 17% of its stock value over the past year.

Qihoo 360’s mobile prospects

Shi and Wei stated that they remain concerned on the mobile prospects of Qihoo 360 Technology Co Ltd (NASDAQ:QIHU) because it does not have strong moat against competition.

The analysts noted that the competition in mobile app store is increasing based on their latest channel checks. Tencent Holdings Ltd (HKG:0700) and smartphone manufacturers are boosting their competitiveness for quality third-party games.

Shi and Wei commented that the Qihoo 360’s goal to increase its mobile search traffic to ~25% of its total search traffic by the end of 2014 was “quite ambitious.”

The analysts maintained their Neutral rating for the shares of Qihoo 360 Technology Co Ltd (NASDAQ:QIHU) with a price target of $84 per share. The analysts explained, “Our target price implies 24x2015E P/E. As Qihoo is heading for a seemingly predictable growth mode, the premium in trading multiple it has enjoyed for potential earnings beat could gradually be diminishing, in our view.”

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