NEW YORK (TheStreet) -- Qihoo 360 Technology (QIHU) stock is falling 0.95% to $67.04 in midday trading Friday after the Chinese Internet company's joint venture secured licensing rights for a game in China.
The company's joint venture with The9 Limited (NCTY), which is called OrientalShinyStarLimited, reached a license agreement that will allow it to stream the game "Cross Fire 2" in mainland China for five years.
Oriental Shiny StarLimited will pay $50 million and payments totaling $450 million to the Korean game developer Smilegate Entertainment for the rights to the game, which is the sequel to Cross Fire.
Smilegate's Cross Fire game is has more than 6 million concurrent users and 400 million registered players, according to the company.
The9 Limited stock is surging 14.61% to $4 in midday trading on Friday.
TheStreet Ratings team rates QIHOO 360 TECHNOLGY CO -ADR as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate QIHOO 360 TECHNOLGY CO -ADR (QIHU) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 37.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- QIHOO 360 TECHNOLGY CO -ADR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, QIHOO 360 TECHNOLGY CO -ADR increased its bottom line by earning $1.71 versus $0.76 in the prior year. This year, the market expects an improvement in earnings ($3.51 versus $1.71).
- The gross profit margin for QIHOO 360 TECHNOLGY CO -ADR is currently very high, coming in at 83.46%. Regardless of QIHU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.55% trails the industry average.
- Currently the debt-to-equity ratio of 1.50 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.54, which shows the ability to cover short-term cash needs.
- QIHU has underperformed the S&P 500 Index, declining 5.52% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full analysis from the report here: QIHU
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.