- Qihoo will report 2Q14 before market opens on Monday.
- Search and mobile is expected to maintain their strong growth profile.
- MediaV a near-term pain but long-term impact is attractive. Remain bullish on the stock.
Qihoo (NYSE:QIHU) will report its 2Q14 earnings on Monday before market opens. The detail of the conference call is below:
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Consensus expects $0.46 in EPS (vs. $0.40 a year ago) on revenue of $309m (+104% y/y). The stock has outperformed the broader NASDAQ by 5% over the past three months.
Expect continued momentum in search and mobile
The company guided $300-305m in revenue, slightly conservative vs. consensus but nonetheless indicates that both online advertising and IVAS (ie. mobile games, search and advertising) to continue its near-term momentum. In particular, search will be an area to focus as CNZZ recently released its China search market estimate in which QIHU has 30% of the market in terms of page views vs. Baidu's (NASDAQ:BIDU) 55%, indicating that Qihoo is gaining momentum in the search market. On the same note, iResearch data indicates that Qihoo's search time spent market share has improved to 16% in Q2 vs. 14% at the end of last year, another indication that Qihoo is making progress in search.
I expect mobile search to accelerate in the latter half of the year on the back of new product launch (ie. mobile search app) and mobile browser with embedded search services, which will be accretive to search traffic down the road.
MediaV a near-term pain but a long-term gain
In May, Qihoo purchased a majority stake in MediaV, a VC-backed advertising and digital marketing company for $100m. This move indicates that Qihoo is active in securing strategic investments and putting its cash to use for potential M&A. The near-term impact of the MediaV acquisition will be margin dilutive given the minimal revenue contribution but long-term's contribution from MediaV's targeted ad system could accelerate mobile and search advertising, which will likely to be margin accretive.
I am a buyer of Qihoo ahead of result. At 41x forward earnings, the stock looks attractively priced given the long-term growth profile, competitive positioning in mobile and emerging opportunity in search.