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NEW YORK (TheStreet) -- Qihoo 360 Technolgy (QIHU has been downgraded by TheStreet Ratings from Buy to 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 compelling growth in net income. 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:
- QIHU's very impressive revenue growth greatly exceeded the industry average of 28.9%. Since the same quarter one year prior, revenues leaped by 100.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, QIHOO 360 TECHNOLGY CO -ADR's return on equity exceeds that of both the industry average and the S&P 500.
- QIHOO 360 TECHNOLGY CO -ADR's earnings per share declined by 14.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, QIHOO 360 TECHNOLGY CO -ADR increased its bottom line by earning $0.76 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($2.51 versus $0.76).
- Currently the debt-to-equity ratio of 1.72 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 4.05, which shows the ability to cover short-term cash needs.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, QIHU has underperformed the S&P 500 Index, declining 24.53% 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 Ratings Report
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