Qihoo 360 Is Still Growing Faster Than Baidu
Once again, Qihoo 360 is proving its worth as one of China's fastest-growing Internet companies.
The company behind China's leading Internet-security software and Web browser posted better-than-expected quarterly results. Revenue soared 124% to $187.9 million, as both its online advertising and game-platform operations more than doubled during the period. Despite spending on building up its gaming platform and monetizing its fast-growing search engine, net margins still widened, leading adjusted earnings to rise to $0.47 per ADS, up from its $0.20 per ADS showing a year earlier. Analysts were only holding out for a profit of $0.37 per ADS on $181.7 million in revenue.
Qihoo 360's guidance also topped expectations, as the dot-com darling sees revenue at least doubling during the current quarters.
The news apparently wasn't good enough for one analyst. Shares of Qihoo 360 opened lower after Stifel downgraded the stock -- from buy to hold -- on momentum concerns. It sees revenue growth being challenged through the next couple of quarters, and it's worried about a likely increase in marketing costs early next year.
The news wasn't all bad. Morgan Stanley boosted its price target to $95.30. It's been following Qihoo 360 all the way up, boosting its price target to $80.40 this summer.
Qihoo 360 has been one of China's biggest winners since rolling out its own search engine last year. Baidu investors initially scoffed at the potential threat, but now Qihoo 360 has established itself as a force. It's not a distant second in this growing field to Baidu. Sure, Baidu fields the majority of search queries in China, but investors don't mind betting on the underdog when it's profitable and growing quickly.
Baidu's no slouch. It moved higher after posting a 42% surge in revenue in its latest quarterly report. More important, its guidance called for revenue growth to accelerate to as much as nearly 50% during the new quarter. Baidu's top line may be accelerating at a time when Qihoo 360 is going the other way, but there's no way to deny that Qihoo 360 is still expected to grow more than twice as fast as Baidu this quarter.
Both companies are doing well. Both stocks may not seem cheap, but they're fetching reasonable multiples given their growth rates. The best strategy remains to be buy both instead of having to choose one over the other to gain some skin in China's potent online-search market.
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The article Qihoo 360 Is Still Growing Faster Than Baidu originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Baidu. The Motley Fool owns shares of Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
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