Qihoo Jumps to Two-Month High on Bets Outlook to Beat Estimates

Qihoo 360 Technology Co. (QIHU), maker of China’s most-used Web browser, jumped to the highest level in two months on prospects its outlook for third-quarter sales will beat analysts’ estimates.

American depositary receipts of Qihoo surged 9.6 percent to $20.31, the highest level since June 7, as of 3:42 p.m. in New York.

The Beijing-based company, which also makes China’s most- used web browser, started an online search engine last week for public testing, co-Chief Financial Officer Alex Xu said in a phone interview on Aug. 15, adding the product may eventually generate advertising sales.

“Some postings on discussion forums over the weekend have stated that Qihoo’s new search engine has diverted more traffic to some company websites than Sohu’s search engine,” Henry Guo, an analyst at ThinkEquity Partners LLC, said by phone from San Francisco. “This helped dispel earlier concerns that Qihoo may not have the technical ability to develop a search engine successfully. I also expect its second-quarter sales to be at the top end of its guidance.”

Sohu.com Inc. (SOHU) owns China’s third-biggest online search engine while Baidu Inc. has the biggest.

Qihoo forecast on May 22 that second-quarter sales would jump as much as 108 percent to $73 million. It is scheduled to report the results tomorrow after U.S. markets close.

Qihoo’s third-quarter sales guidance may exceed analysts’ average estimates, mainly driven by its games and advertising business, Tian X. Hou, the founder of T.H. Capital LLC in China, said in a research note today.

“QIHU can easily convert its browser users into search engine users. The expansion into the search area could be a strong positive for the company’s growth in the foreseeable future,” Hou wrote.

The company’s third-quarter sales may rise 64 percent from a year ago to $77.8 million, according to the average estimate of eight analysts compiled by Bloomberg.

Hou and ThinkEquity’s Guo both maintained buy recommendations on Qihoo’s stock.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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