UPDATE: Barclays Capital Initiates Qihoo 360 with Overweight on Expected Further Catalysts

In a report published Wednesday, Barclays Capital analyst Alicia Yap initiated coverage on Qihoo 360 Technology Co.

with an Overweight rating and $38.00 price target. In the report, Yap noted, “Following the release of its search engine (Aug 2012) and the announced partnership with Google (Jan 2013), Qihoo's share price has re-rated. We expect further catalysts to come from: 1) a gradual ramp-up of its sales network through both expanded direct sales and the build-up of agency channels, leading to further growth in search revenue; 2) mobile Internet opportunities, via its rising penetration rate in mobile security and potential success of its app store strategy; and 3) non-GAAP margins expanding to the targeted normalised rate of 40%. We initiate coverage with an Overweight rating and US$38 PT, based on 20x 2014E non-GAAP EAPDS of US$1.88, which implies 0.26x PEG to a two-year (2013-15E) earnings CAGR of 77%. Top picks within our China Internet universe are Tencent, NetEase and Youku(all rated OW).” Qihoo 360 Technology Co. closed on Tuesday at $30.44.