Qihoo 360 Technology Co Ltd (NYSE:QIHU) tanked by over 5% to $45.16, breaching its 52-week lows. A day after it reported an upbeat fourth quarter earnings and an equally interesting first quarter outlook. The sudden U-turn in investors’ reaction has left many puzzled, but analysts have their explanations in order. According to JG Capital’s Henry Guo, the first quarter outlook, which though above market consensus has fell short of investors’ expectations. Guo projects a better second-half for the company.
Second-half looks pretty
He added that while the first quarter guidance released by Qihoo 360 Technology Co Ltd (NYSE:QIHU) points at slow growth, there are several growth drivers present in the second half. He said that the weakness in the first half could be driven by seasonality and slowdown in the lottery business, but the momentum will gain in the second half. Guo said that factors such as revamp of desktop and mobile search monetization increased medical search contribution, and enterprise security revenue should help the company gain back its position. Analysts said that investors might be worried as how Qihoo 360 Technology Co Ltd (NYSE:QIHU) will mobilize traffic to its mobile app store and monetize from it.
Confidence but caution
However, despite such concerns, UBS’s Erica Poon Werkun upgraded rating on Qihoo 360 Technology Co Ltd (NYSE:QIHU) to ‘Buy’. She has also revised the price target to $85 from $84. The research team noted that the mobile games revenue recorded a growth of 11.3% to $59 million in the fourth quarter, but its mobile app distribution revenue dipped by 10% to $24 million quarter-over-quarter. The research team maintains a cautious outlook for the company’s long-term mobile growth.
Unlike UBS, HSBC’s Chi Tsang revised the price target on Qihoo 360 Technology Co Ltd (NYSE:QIHU) to $56 from $68 while keeping the ‘Neutral’ rating. Tsang said that the company has much more to do in order to keep itself in the race against competitors such as Baidu Inc (ADR) (NASDAQ:BIDU) and TENCENT HOLDINGS ADR (OTCMKTS:TCEHY).