Oct. 25, 2013, 4:21 PM
- Chinese Internet and solar stocks, many of which have skyrocketed this year, have closed with decent losses after the Shanghai exchange fell for the fourth day in a row amid credit crunch worries, and as NQ Mobile continued to feel the impact of Muddy Waters' fraud allegations.
- Muddy Waters' detailed accusations regarding ghost addresses, a shell company, inflated market share figures, dubious cash balances, and spyware are likely to yield fresh scrutiny of the financial statements provided by Chinese ADRs, and could also affect the reception given to upcoming IPOs (I, II). Investor concerns about the bookkeeping of U.S.-traded Chinese firms had diminished some this year.
- Chinese Internet decliners: VIPS -9.1%. AMAP -6.1%. YY -6%. QIHU -4.8%. PWRD -5.7%. CYOU -4.7%. SINA -3.8%. LONG -3.5%. YOKU -3%.
- Chinese solar decliners: YGE -12.2%. JKS -9.4%. JASO -9%. DQ -7.2%. TSL -6.8%. CSIQ -4.8%. CSUN -4.4%.
Oct. 24, 2013, 1:19 PM
- Muddy Waters has started coverage on NQ Mobile (NQ -30%) with a Strong Sell; the firm's target price is below $1. (report - .pdf)
- MW claims at least 72% of NQ's 2012 Chinese security software revenue ($32.2M) is "fraudulent," and that much of it ($20.2M) came from a shell company called Yidatong. The firm says an investigation found Yidatong's offices were "either non-existent or completely empty."
- MW also declares NQ's third-party payments channel to be "non-existent," and its Chinese payments portal to be "purely cosmetic." It estimates (citing survey data) NQ has only a 1.4% share of the Chinese security app market rather than a stated 55%, and that Qihoo (QIHU -0.5%) dominates the space with a 73.5% share. Also, MW's store checks indicated few phones had NQ's software pre-installed, and that its prepaid card sales were limited.
- Meanwhile, NQ's apps are declared to be "spyware," and its global app revenue below $1M/year. The company's acquisitions are deemed "highly likely to be corrupt," with ghost addresses uncovered for some of them, and its cash balances "highly likely to not exist."
- Update (2:01PM ET): The selloff has worsened. NQ now -51.8%.
Oct. 22, 2013, 3:54 PM
- After opening higher in sympathy with Netflix, high-flying U.S. and Chinese Internet stocks are closing lower in sympathy with the streaming giant, which is down 8.2% after trading up over 10% AH yesterday in response to its Q3 numbers.
- In addition to Groupon, which has been stung by an ITG Research note, U.S. decliners include Facebook (FB -1.9%), LinkedIn (LNKD -1.7%), Yelp (YELP -2.3%), Zillow (Z -2.5%), and Trulia (TRLA -1%).
- Chinese decliners include Baidu (BIDU -1.6%), Sina (SINA -2.9%), Qihoo (QIHU -3%), Ctrip (CTRP -2.1%), and NQ Mobile (NQ -3.5%).
- Chinese e-commerce plays Vipshop (VIPS -3.7%) and LightInTheBox (LITB -4.9%) are also lower. In addition to the general selloff, they appear to be getting hurt by Dangdang's Q3 warning.
Oct. 18, 2013, 10:29 AM
- "We believe that Google's (GOOG +12.8%) ability to monetize experiences through engagement-based services will allow it to disrupt many hardware and software layers over time," writes Evercore's Ken Sena, exemplifying the glowing analyst commentary that has followed Google's Q3 beat.
- Sena, who is raising his PT to $1,100, sees Google's services investments pressuring near-term margins, but also creating "a stronger platform ecosystem in which more collected data, better predictive analytics, and an increased amount of screen connectivity will lead to better overall search economics in addition to new opportunities."
- Needham and Jefferies have raised their PTs to $1,150, and Deutsche has raised its target to $1,220. YouTube's mobile growth, strong paid click volumes, and the potential for Enhanced Campaigns to lift search ad sales (after doing less damage than expected in Q3) are all mentioned as reasons to stay bullish.
- U.S. Internet peers continue to rally in sympathy: FB +4.1%. LNKD +3.7%. YELP +7.8%. AMZN +3.3%. Z +3.9%. TRLA +4.8%. ZNGA +2.8%.
- Foreign Internet names are also moving higher: BIDU +5%. YOKU +6.9%. SINA +3.7%. RENN +4.4%. QIHU +4.9%. DANG +5.9%. YNDX +4%. SIFY +3.4%.
- Google's Q3 results, details, CC remarks, transcript
Oct. 4, 2013, 12:24 PM
- Chinese Internet firms, already shown plenty of love by momentum traders this year, are rallying again following the release of Twitter's public S-1.
- Chinese microblogging leader Sina (SINA +4%) is among the gainers, and so are fellow social networking plays YY (YY +3.2%) and Renren (RENN +9.7%). But several other names are also taking part in the rally: BIDU +2%. NQ +2.7%. CYOU +6.9%. DANG +4.1%. SOHU +5.4%. SFUN +5.8%. AMAP +3.4%. QIHU +2%.
- Twitter mentioned in its S-1 78% of the 218.3M monthly active users it had at the end of Q2 were outside the U.S. But few of them are in China, where its services (like Facebook's) are generally blocked.
Sep. 26, 2013, 6:00 PM
- Things have turned bitter between Qihoo (QIHU) and SOHU after the latter sold a 36.5% stake in its Sogou search unit to Tencent instead of to Qihoo, as had been speculated. After trading barbs publicly, the two companies are now suing each other over allegations that both companies' software is switching users' browser preferences without permission.
- Beneath the surface of verbal and legal jabs, Qihoo may damage Sohu in a more material way. Wedge Partners analyst Juan Lin notes, "A significant share of Sogou’s search traffic is through traffic acquisition (around 40%) and directed by the Sogou browser. Since Qihoo’s PC anti-virus software has penetrated into over 90% of Chinese internet users, we think it may create difficulties for Sogou to further develop its search engine and browser."
- Further, "[T]here is a risk that Qihoo will reduce the traffic it directs to Sohu video. Currently around 10% of Sohu video traffic comes from Qihoo, and the share has been increasing rapidly."
Sep. 16, 2013, 2:51 PM
- Baidu (BIDU -0.3%) has begun selling a CNY198 ($32) HDMI stick that allows users to stream content (via Wi-Fi) from PCs and mobile devices to a TV set. The product, which bears a very strong resemblance to Google's much-praised Chromecast, supports content from Baidu's iQiyi video site, among other sources.
- Baidu has been expanding its hardware lineup lately. The search giant has already rolled out dongles for creating Wi-Fi networks and remotely downloading content, and partnered with local electronics giant TCL to offer smart TVs with plenty of built-in Baidu services.
- Meanwhile, Citi is defending Baidu rival Qihoo (QIHU -5.1%) as shares sell off on news Sohu's Sogou unit is merging with Tencent. The firm still expects Qihoo to grow its Chinese search share to 28% in 2014 via organic growth, and says checks indicate Baidu's acquisition of 91 Wireless hasn't yet "meaningfully hurt" Qihoo's app store position.
- Earlier: Baidu higher after Sohu merges with Tencent
Sep. 16, 2013, 9:17 AM
Sep. 16, 2013, 8:23 AM
- SOHU gains 6.4% premarket after announcing a strategic cooperation deal with Tencent (TCEHY.PK, TCTZF.PK), initiated by Tencent investing $448M and the two merging their search businesses. After the deal, Tencent will own 36.5% of Sogou's equity capital, which could further increase to 40% in the near future.
- Off 5% premarket is Qihoo (QIHU) which had been speculated as the buyer of Sohu's Sogou search unit.
- Press release.
- Conference call to discuss the transaction begins at 8:30 ET.
Sep. 13, 2013, 5:24 PM
- Youku's (YOKU +9%) Tudou mobile video apps will integrate a Qihoo (QIHU -2.5%) "handset cleaner" tool that scans phones for viruses and promises to improve device performance.
- The partnership is tied to Qihoo's Highlights initiative, which gives 3rd-party developers access to its security APIs. Qihoo claims nearly 100 apps now support the initiative.
- Both Youku and Qihoo are doing well on mobile. Youku's daily mobile video views have topped 200M, and mobile now makes up over 30% of the company's traffic. Qihoo asserts 338M smartphones used its 360 Mobile Safe security app at the end of Q2.
Sep. 11, 2013, 1:28 PM
- Search/security software/app store rivals Baidu (BIDU +5%) and Qihoo (QIHU +4.3%) are each surging to fresh 52-week highs. Qihoo, now up over 3x YTD, is also making new all-time highs (Citron Research can't like that).
- Citi, which upgraded Baidu to Neutral on July 16 and Buy on Aug. 9 after issuing very bearish commentary earlier this year, says its research indicates the ratio of ad clicks to queries on mobile devices is half the ratio for PCs, a level it deems better than expected.
- Citi also theorizes "paid clicks on smaller mobile screens are more likely to be clicked by users, given the limited number of search results displayed on the smaller screens," and that this compensates for lower keyword coverage by advertisers. Of course, accidental clicks could also contribute to higher mobile click rates.
- Citi now has a $167 PT on Baidu, equal to 25x 2014E EPS.
Aug. 30, 2013, 12:48 PM
- The China mobile internet sector has collected enough users, J.P. Morgan says, and prefers Qihoo (QIHU -0.7%) and Tencent (TCEHY.PK, TCTZF.PK) because they have already amassed large mobile platforms.
- Both companies should continue to capitalize on China’s booming mobile economy, the firm says; it expects Tencent to capture 30%-35% mobile game share by the end of 2014 through content development and distribution, while QIHU could take 10% through distribution.
- The firm cuts Youku (YOKU -2.7%) and Sohu (SOHU -2.1%) to Neutral from Overweight.
- JPM also likes online real estate services platform Soufun (SFUN +4.6%) for its market leading position; users seem sticky and barrier to entry seems high.
Aug. 28, 2013, 11:22 AM
- Qihoo's (QIHU -6.6%) 2018 convertible notes carry an interest rate of 2.5%, and a conversion price of $110.96 (51% above current levels). (PR)
- Goldman estimated (before the deal was priced) the offering would dilute EPS by 4%-6%. The firm thinks Qihoo will use the proceeds " to strengthen its presence in the key strategic areas, such as in mobile gaming and search," to counter the expansion efforts of rivals.
- Judging by today's rally in Sohu (SOHU +4.7%) shares, some investors are clearly betting Qihoo will use the funds to strengthen its search presence by acquiring Sohu's Sogou unit, for which Qihoo has already held buyout talks.
- Previous: Qihoo announces $550M convertible debt offering
Aug. 28, 2013, 9:11 AM
Aug. 27, 2013, 5:41 PM
Aug. 27, 2013, 4:31 PM
- Qihoo (QIHU) is taking advantage of its giant 2013 run-up to offer $550M worth of convertible senior notes due Sep. 2018. (PR)
- A $50M overallotment option exists. The notes can be redeemed "under certain circumstances on or after September 20, 2016."
- Qihoo had $379M in cash/investments on its balance sheet at the end of Q2, and no debt. Is the company looking to use the offering to help finance a deal for Sohu's Sogou unit?
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