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Tickers in this Article: BIDU, GOOG, YHOO, SOHU, NTES
Chinese Internet search engine Baidu (Nasdaq:BIDU) continued its sizzling growth, with substantial revenue and earnings increases. The stock shot up more than $90 on the news, to over $700 a share. The company announced it will do a ten-for-one stock split to make shares more affordable for foreign investors.

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The Phoenix Factor Plus Goodbye, Google
Baidu continued to reap rewards from its Phoenix Nest online advertising platform. The company cited many of its gains as due to this. Also, the subtraction of global internet search engine giant Google (Nasdaq:GOOG) from the Chinese market has allowed Baidu even more elbow room.

Baidu's quarter looked like this: diluted EPS $2.02, up 165% to $70.4 million. Revenue was $189.6 million, an increase of 60%. The company expects next quarter's revenue to grow to between $268 to $274 million. The ten-for-one stock split on the ADR will take place May 12.

Google Not Hurting
Mega giant Google, whose stock price has fallen from its 52-week high of $629.51 to $525.75 in recent trading, is not exactly threatened by Baidu's success. Despite the uncomfortable exit by Google from China, which at this point seems more like Pluto's demotion from its status as a planet - nominally interesting yet of little real consequence, Google's raking in the cash. With its juggernaut market cap of $168 billion, it can easily get over its China eviction. That said, if Baidu figures out a way to become more of a global player in five or ten years, then what is now a non-story may become more interesting.

Baidu's Rivals
Baidu is more the size of Yahoo (Nasdaq:YHOO) at a market cap in the $24 billion range. It is fighting things out with Chinese rivals such as SOHU (Nasdaq:SOHU), NetEase (Nasdaq:NTES) and others. The small vacuum Google's leaving China has created will be temporary, if not momentary.

Sohu and NetEase are more heavily involved in online gaming, a huge phenomenon in China. Sohu trades at a multiple of about 15 and grew revenue by 12% year-over-year for it's latest quarter, with online gaming revenue up 17%. NetEase shows a similar growth pattern and trades at a forward PE of 11. There are plans by these companies to more heavily export the online gaming outside of China.

Is Baidu Stock A Buy At $700?
Stock price momentum aside, Baidu is growing at a terrific rate. Traders who look to begin buying at year-highs will be buying or have bought into the stock already. What about fundamental investors? Though the growth rate is high, so too is the PE even if you allow generously for $10 to $20 EPS. That gives you a multiple of 35 to 70. We love the company and we've liked the stock, but any slip up may slam investors who are late to the party. Sure, there's still potential upside for now. Remember, though, Baidu had a sketchy quarter a couple of quarters ago, and both the Chinese market and the US markets have been running hot lately, so Baidu's stock is getting priced in that rarefied perfection zone. (For more stock analysis, take a look at America's Top Dividend-Paying Stocks)

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