| Stock (Symbol) | Stock Price | |
Qihoo 360 (QIHU) |
$86 |
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| Data is as of | Expected to Report | Sector |
October 3, 2014 |
Nov 24 – Nov 28 |
Technology |
| Sharek’s Take | ||
 Qihoo’s spending has sent shares down to the point I think the stock can triple in two years. Sales grew 109% last qtr, but sales & marketing costs soared 254%. Some of this was one-time marketing including ads during the World Cup and the company plans to cut back spending. Still, all the spending cut operating margin from 36% to 22% year-over-year and this spooked investors. After QIHU reported, headlines read analysts cut estimates but when the dust settled I see NxtQtrEst dropped just 8 cents and 2QtrsOutEst fell by a penny. No big deal. Qihoo is spending to grow its mobile search service, which was 5% of sales in early 2014, is in the teens now, and is expected to be 25% of sales next year. And just two days ago management authorized a $200 million share purchase program, but that’s only 2% of QIHU’s market cap so that will help very little. QIHU is still a top-tier stock, revenue has soared from $110m to $152m, $188m, $222m, $265m and $318m the last 6 qtrs. Management plans to trim spending, says margins will increase during the 2nd half of 2014, and doesn’t expect spending to expand in 2015. QIHU I feel this $86 stock can triple to $202 by next year. |
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| One-Year Chart | ||
 The bottom fell out of this stock. Some of its Qihoo’s fault, some due to fund managers selling Chinese Internet stocks to get cash to buy Alibaba, which just had its IPO. QIHU’s P/E of 27 is way too low when compared to the Est. LTG of 43%. Profit growth falling from triple-digit rates to the 20% range may have caused computers to issue sell signals. |
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| Earnings Table | ||
 Profits increased only 22% on a 109% jump in sales. Revenue was $318 million last qtr, beating management’s earlier guidance of $300-$305 million, which was upped from $270 million.QIHU beat by only a penny, it crushed estimates by 20 cents 2QtrsAgo, and this probably caused selling in the shares. Annual Profit Estimates did increase, but only by a little. Quarterly estimates don’t look bad, and looking ahead the 4QtrsOut estimate looks strong. It would be nice for QIHU to get back to triple-digit profit growth. |
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| Fair Value | ||
 I’m taking my Fair Value P/E from 60 to 50 because qtrly profit growth could be subdued the next few qtrs. But the combination of and expected 63% increase in profits next year and a better P/E ratio than today give this stock significant upside potential. |
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| Ten-Year Chart | ||
 I wish to point out one thing here in the long-term view, and it’s not the stock chart. Qihoo made $0.55 in 2011. It’s expected to make $5.59 in 2016. So in five years profits could increase ten fold. Folks, this is still a top growth stock, and I think it’s a bargain here. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
5 of 24 |
Qihoo is down due to temporary overspending, but that’s made this stock a bargain in my eyes. I see very few opportunities like this in my career, and intend on increasing my already large position in this stock. I see huge upside here. |
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Aggressive Growth Portfolio
4 of 11 |
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