QIHU now has about 20% of China search market. With Sohu/Sogou's 9% and about 9% for everyone else (Bing, Google, and Soso, etc.) That leaves about 62% for Baidu which has a current valuation of about $49 billion. QIHU is much bigger than BIDU in security software, online games, and browser market share. Let's be conservative and leave those three out in our comparison. At 20% vs. 62% search market, QIHU should be worth about 32% (20/62). In other words, QIHU should have a $15.7 billion market cap at the minimum (remember we are being conservative here). However, at today's closing price of $78.80, QIHU's market cap is about $9.3 billion. At $15.7 billion, QIHU should be at $133/share. If count the three categories above, QIHU can easily be worth $30/share more, or at $163/share. China Internet market in general and search market in particular are still growing at double digit pace. Moreover, QIHU is growing much faster than BIDU in terms of revenue (138% vs 70+%), therefore taking a bigger slice of the growing pie. That should add a premium of about $30 minimum. That takes it to $193. Even at $193/share, it translates into a market cap of $22 billion, less half of BIDU today. Oh, one more thing. QIHU's software penetration reached 96% of all online users in China. Anyone who has its browser or security software installed, can just double tab the control key to bring up a search box/window. These guys are smart. They are leveraging the existing customer base to get them hooked into their search and other things down the road. If they don't reach 96% search market, they are at least going to beat BIDU which, due to their monopolistic behavior, is being resented by the online public. The bottom line, QIHU can easily be worth $200/share. If you don't think BIDU is overvalued, QIHU at $200/share is undervalued by at least 50%. Do I hear $400/share some time in the future? You be the judge.
Actually I did this math last week or so and came up with a price of $397 for QIHU when you compare them to BIDU and the search marketshare. This also figured the cash that Bidu has and I backed it out of QIHU.They are grossly undervalued. Sina is not apples to apples. Their search piece is worth much less.
In that case SOHU should have 15% of BIDUs market cap which is 7.3B. At 7.3B , SOHU should be at $183/share. It has three times the rev of Qihu , 1B in cash, 38M shares outstanding, owns 68% of CYOU and search revenue of 200M a year. SOHU wins every way.