Why Qihoo 360 Shares Tumbled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of China-based Internet and mobile security company Qihoo 360 Technology (NYS: QIHU) made a 180 today and headed lower by as much as 13.5% before paring half of their losses following the company's first-quarter earnings results.

So what: Between European pessimism and Facebook (NAS: FB) backlash against the entire social media sector stemming from its botched IPO, Qihoo couldn't have picked a worse day to report what appear to be very strong results.

For the quarter, Qihoo's revenue spiked 202.1% to $69.3 million as monthly active users grew to 411 million and its penetration rate climbed to 62%. Profits for the quarter came in at $0.12, which reversed a year-ago loss and represented a 290% year-over-year rise. These results compared favorably with revenue easily bypassing analysts' forecasts and EPS coming in $0.05 better than expected. Better yet, Qihoo forecast second-quarter revenue growth of 105% to 108% for a range of $72 million to $73 million -- also well ahead of the $67.3 million consensus.

Now what: It's difficult to trust anything China-based given the rash of accounting scandals still fresh in investors' minds, but I admit I'm starting to be intrigued by Qihoo's valuation. At just 15 times forward earnings and $3.04 in cash per share with no debt, Qihoo is bound to turn heads with its recent triple-digit revenue growth rate. The keys for Qihoo will be staying transparent with investors and looking for opportunities to branch out its products internationally. It's definitely a company worth keeping a close eye on.

Craving more input? Start by adding Qihoo 360 Technology to your free and personalized watchlist so you can keep up on the latest news with the company.

At the time thisarticle was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.