Qihoo 360 Technology Co Ltd (QIHU) Q1 Earnings Preview

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Chinese Internet giant Qihoo 360 Technology Co Ltd (NYSE:QIHU) hasn’t yet announced its first quarter results reporting date. But Barclays analysts Alicia Yap and Anand Ramchandran expect the company to announce Q1 results during the week of May 19 or May 26. Qihoo is a leading Chinese PC security software provider. The company also has a strong presence in the mobile app store and Internet browser markets.

Expect Qihoo 360 to handily beat the consensus estimate

Barclays said in a research note that it expects Qihoo 360 Technology Co Ltd (NYSE:QIHU) to report solid first quarter results and provide strong current quarter guidance. The research firm forecasts Q1 revenues to surge 108% to $228.1 million, in line with the Wall Street consensus of $228.2 million. Barclays expects Qihoo’s first quarter earnings of 32 cents, a bit conservative than the consensus estimate of 35 cents.

Qihoo 360 Technology Co Ltd (NYSE:QIHU) is a beneficiary of the booming Chinese e-commerce and mobile market. Its search revenues are expected to come in at $41 million, accounting for 18% of the total estimated revenue. The app-store revenues are expected at $45 million or 20% of the total sales. Barclays expects Qihoo to easily beat the consensus estimate due ti improvement in search monetization and rapid growth in mobile Internet revenues.

Yap and Ramchandran said they expect Qihoo 360 Technology Co Ltd (NYSE:QIHU) to report Q1 non-GAAP operating margins of 20%, up from 17.1% in the same quarter last year. The Beijing-based company’s stock has declined from the March 6, 2014 high of $121 to $78.10 on Wednesday. The stock came under pressure due to the overall sector de-risking sell-off in the past few weeks. However, it has the potential to bounce back.

Qihoo 360 has three key near-term catalysts

The analysts see three key near-term catalysts. One, better than expected growth of Qihoo 360 Technology Co Ltd (NYSE:QIHU)’s mobile app-store distribution. Two, further improvement in search traffic could lead to a strong rise in search revenues. Three, operating margins could improve significantly if revenues beat expectations in 2014, riding on rapid growth in mobile and search revenues.

For the current quarter, Barclays expects Qihoo 360 Technology Co Ltd (NYSE:QIHU)’s revenues to soar 81% YoY to $274.1 million. Second quarter non-GAAP earnings are likely to come at 64 cents with 34% operating margin.

Qihoo 360 Technology Co Ltd (NYSE:QIHU) shares were down 0.13% to $78 in pre-market trading Thursday.

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