Meng roots for Qihoo 360 Technology (NYSE:QIHU), over Baidu.com (NASDAQ:BIDU)
Cynthia Meng is an analyst for Jefferies, and on Sunday, she put her Baidu.com, Inc. (ADR)(NASDAQ:BIDU) shares on the market, after trimming the price, and offering it at $125, from the initial price of $135. She said that in the Chinese Search market, Baidu was facing still competition from Qihoo 360 Technology Co Ltd(NYSE:QIHU), which is a browser software-making company. She therefore cut her shares from Hold to Buy, late on Sunday.
She said that she had noticed the shift of traffic from Baidu to Qihoo 360 and according to her estimates this would result in Baidu missing out on not just the Street Profits, but also the revenue estimates for the fourth quarter, and even beyond that. She was quoted saying that as per the current prices, “Valuation multiples look full based on our revised estimates.”
Meng also declared that she saw the Q3 revenues at the low end of the management guidance and she has also trimmed the estimates for Q3 as well as Q4 for the years 2013 and 2014. She had noticed a small drop of traffic in Baidu, which she thought was quite significant, and therefore, has been banking on Qihoo 360 to get the position. She saw a four percent fall in traffic in Baidu during the second quarter, and she thinks that traffic acquisition costs. The percentages might be likely to rise in the coming quarters, with respect to sales.
The local browsers are more common and easily accessible in the Chinese web portals, because of the restrictions in the internet by them with respect to other kinds of material. The local internet laws in China are quite strict, but a number of search engines are coming up online, in order to fill the void, and gain as much revenue as possible. These search engines gain their income by getting payments from companies for putting up their advertisements, therefore, it is essential that the traffic increases in a particular search engine, so that the increased traffic gets the companies interested in putting up their advertisements on the search engine’s portal. Baidu might have chances to recover from the fall in traffic.