Qihoo Makes a Case for Higher Prices
The stock has the look of an emerging leader.
The major averages remain in confirmed uptrends which means it's important to keep an eye on stocks with strong fundamentals showing relative price strength. Some will eventually go on to be big market leaders -- especially newer companies still in the early stages of growth.
It wasn't that long ago when my screens were teeming with China-based growth stocks under accumulation. It's a much different story now as names as Internet names like Netease.com (NASDAQ:NTES), Sohu.com (NASDAQ:SOHU), Perfect World (NASDAQ:PWRD) and Changyou.com (NASDAQ:CYOU) continue to face selling pressure. But China-based Qihoo (prononounced "chi-hu") 360 Technology (NASDAQ:QIHU) continues to trade well as fund managers continue to embrace its growth story. The stock has the look of an emerging leader.
The China-based firm, with a market capitalization of $2.9 billion is very liquid with an average daily volume of 1.7 million shares. It's a provider of Internet and mobile security products in China. It went public in March 2011 at $14.50 a share and closed at $34 on its first day of trading.
The company has all the qualities I like to see in stock: Big earnings and sales growth in recent quarters, bright growth prospects and high return on equity. Recent price and volume trends point toward a stock under accumulation by institutional investors.
Last month, Qihoo reported strong third-quarter results, with profit up 25 percent from a year ago to $0.20 a share. Sales rose 77 percent to $84 million. The company gets most of its revenue from internet advertising (70 percent) and value-added software, including video games (26 percent). In August, Qihoo launched its own Internet search engine which, according to some estimates, has already gained eight to 10 percent of the search market in China. CEO Zhou Hongyi is gunning for a 15 percent to 20 percent share.
It's not surprising to see institutional investors continue to dump Baidu (NASDAQ:BIDU) and gravitate toward Qihoo. It makes sense, actually, because Qihoo is still in its nascent stages of growth.
Qihoo is expected to grow annual earnings by 45 percent this year compared to 2011, and 46 percent in 2013. Remember that earnings growth and institutional buying are the main drivers of a stock's price and Qihoo has both. The stock is quickly approaching its recent high of $25.50, bringing the possibility of a technical breakout into play. Still, after five straight weekly price gains, I wouldn't be surprised to see a low-volume pullback to shake out the last remaining sellers in the stock. This would also be constructive price action. If it happens, it could pave the way for a powerful, heavy-volume breakout over $25.50.
Editor's Note: This content was originally published on Benzinga.com by Ken Shreve.
Below, find some more great ETF and market content from Benzinga:
Hedge Fund Profile: Tiger Global Management
Skullcandy a Buy on Headphone Demand?
Ford Plans Bold Rebrand for Lincoln
Benzinga Pro covers this and all market news in real time. Get your free trial here.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter