A Wall Street Transcript Interview with Echo He, M.D., Ph.D., a Senior Vice President at Maxim Group LLC: Award Winning Research Analyst Shares Her Top Stock Picks in the Chinese Internet Market

Wall Street Transcript

67 WALL STREET, New York - May 12, 2014 - The Wall Street Transcript has just published its Internet Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Increased Mobile Content Traffic - Chinese Online Monetization Trends - Social Networking Economics - Chinese Internet Market - Mobile Monetization - Internet Content Providers - Data Security

Companies include: Baidu, Inc. (BIDU), Google Inc. (GOOG), and many others.

In the following excerpt from the Internet Services Report, Dr. Echo He, an expert analyst discusses her outlook and top stock picks for the Chinese Internet sector for investors:

TWST: What are the top revenue sources for the Chinese Internet companies?

Dr. He: First of all, I think the top revenue source is advertising dollars from the corporate side. There is also quite a bit of revenue from individual users playing online games. Individual users would spend online mostly by buying virtual items. Subscription is another one, as some online video services require a subscription or some kind of membership, but subscription is a minor revenue source.

TWST: Within your coverage right now, who are your favorite names and why?

Dr. He: First, I prefer Baidu (BIDU). Baidu is the number one search engine in China, as Google (GOOG) is here. Baidu is the dominant choice for PC search, probably accounting for around 60% search traffic on PC. It also has dominant mobile search traffic share. That dominant market position gives Baidu pricing power, so Baidu is able to claim premium pricing over competitors. For Baidu, the new growth driver is mobile search.

For this year, I expect revenue growth acceleration over last year. That's why I like Baidu. But Baidu's risk is that it has strong competitors; Baidu has to keep investing and spending to defend its market dominance. Baidu's increasing expenses may lower its margin, which will not likely be as good as it has been in previous years.

Another name I like is Qihoo 360 Technology (QIHU). It is the second-largest search engine in China, with about 25% PC search traffic share. Mobile traffic share is probably not material, but it is the largest competitor of Baidu. The advantage of Qihoo is that it has very good user base to its Internet safety or antivirus software. With this large user base, it is possible for Qihoo to convert existing users to its search. And search of course is the most important revenue driver and the most important growth driver of Qihoo.

We expect Qihoo to deliver a much higher than industry average growth this year and probably over the next couple of years as well. Above industry average growth is what we like. Qihoo's biggest risk is the larger competitor Baidu. Baidu's investment could deter Qihoo's search revenue growth.

The third name we like is YY Incorporated (YY). This company is involved in a newer business...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Rates

View Comments (0)