Bank of America Merrill Lynch maintains Qihoo 360 bid rating of 84 USD

Beijing time November 9 Morning news, BofA Merrill Lynch published a study today, the 360 (NYSE:QIHU) stock rating maintained in the "buy" (purchase) unchanged, the target price of 84 U.S. dollars.

The following is a summary of the contents of the report:

Focus on improving existing product portfolio

Today, we have a dialogue with the management of Qihoo 360 in Beijing, excerpts from the following points.

After Qihoo 360 's foray into new business areas such as search and mobile applications, we expect the company to shift its focus to improving existing products to bolster its competitive position and advance its commercialization process.

-The driving force for navigating Web sites comes from Personalization and pricing:

Qihoo 360 employs a personalized strategy to improve the user experience of its navigation directory business. The company has adjusted its strategy to make it more content-driven, rather than just displaying site links on the navigation site. On the commercialization issue, management expects the advertising revenue of navigation business to continue to grow, the main impetus comes from the price increase of timeliness advertisement.

-Search business focused on user experience, dedicated to improving user "stickiness":

Qihoo 360 adjusted its search traffic share target up to 25% per cent before the end of 2013 (a target of 20% set earlier this year), The main impetus comes from the company's actions to continue to optimize search quality and further exploit the browser and security software user base to facilitate the search business.

At present, 20% of the search traffic from so.com, the rest of the traffic from Qihoo 360 's navigation site. One strategy the company implements is to provide more personalized recommendations to users when searching.

Since the start of commercialization in the first quarter, search advertising revenue is gradually becoming more performance-based (currently 50% of revenue is based on performance). The company acknowledges that its commercialization is still in its early stages compared with its rivals, so there is room for improvement in the future.

-Web game will face the impact from the mobile end:

Qihoo 360 predicts that the 2014-year web-game business will grow steadily and may be eroded by the mobile game. Corporate management has recognized that some developers are shifting resources to mobile gaming. This may affect the overall development of the web gaming industry, but on the other hand, it will reduce competition in the PC Web gaming arena.

-Publish Mobile Search Products:

Qihoo 360 plans to launch mobile search products Shortly thereafter, not the quarter or the next. Qihoo 360 The strategy in the mobile search product area is to shorten the "distance" for users to get the services or information they need. As a result, content aggregation can become very important.

The company launched a video site last month that could serve as a good example of how Qihoo 360 can aggregate content and offer recommendations about movies that cater to the needs of specific users.

In the future, Qihoo 360 's App Store will not only be a platform for distributing native apps, but will also distribute content and information to users. The Company believes that the importance of application stores in China is much higher than mobile browsers.

One of the most important tools for the commercialization of mobile services is mobile gaming. Qihoo 360 predicts that, in addition to boosting revenue potential, mobile gaming will also ensure user stickiness, making further cross-selling possible.

-Security software remains the core product:

Security software is still the most important of Qihoo 360. The company will continue to focus on improving cross-selling capabilities and providing users with a "full set" of online services, so only limited advertising will be available on security products.

-Focus on growth rather than profitability:

Qihoo 360 Management says it will continue to invest in search and mobile applications in the future. In addition, future marketing spending is likely to improve in order to promote security products and collaborate with distribution partners to broaden the user base.

Target Price:

Based on the cash flow discounting method, we set the target price of Qihoo 360 to $84, based on the projected cash for 3 dollars per share, the 11% discount rate and the final growth rate of 3.5%.

Target Price Implementation risk:

The growth of e-commerce advertising expenditure slowed down, the loss of brand reputation, competition, lack of synergies led to return of cash-reduced mergers and acquisitions to investors, and regulatory measures.