Stock (Symbol) |
Baidu.com (BIDU) |
Stock Price |
$196 |
Sector |
| Technology |
Data is as of |
| September 22, 2016 |
Expected to Report |
| Oct 27 – 31 |
Company Description |
 Baidu, Inc. (Baidu) is a Chinese-language Internet search provider (ISP). Baidu serves three types of online participants, which include users, customers and Baidu Union Members. The Company offers a Chinese-language search platform on its Website, Baidu.com. It provides Chinese-language Internet search services to enable users to find relevant information online, including Web pages, news, images, documents and multimedia files, through links provided on its Websites. It designs and delivers its online marketing services primarily on its Baidu.com Website to its online marketing customers. As of December 31, 2014 the Company had approximately 813,000 active online marketing customers. Its online marketing customers consist of small and medium enterprises (SMEs) throughout China, domestic companies and Chinese divisions or subsidiaries of multinational companies. Source: Thomson Financial |
Sharek’s Take |
 Baidu’s been diversifying away from its core search business, which is where the company makes its money. Ninety three percent of the company’s revenue came from online marketing last qtr. Yet when I see headlines and articles about Baidu it’s always about the other things the company is investing in, like a Brookstone type retail store that sells things like a wireless fishfinder, or more recently autonomous cars. Meanwhile, back at the ranch, profit estimates have been in a mudslide — 2016’s have declined from $11.71 to $4.25 during the past 8 qtrs. I feel management should focus on search traffic, as the entire company had only a 10% revenue gain last qtr. Profits? Around a year ago analysts expected a 20% gain for the qtr that just ended. Then this figure got slashed every qtr before until company recorded a dreadful miss as profits fell 40%. Only half the Chinese population has Internet access now compared to 90% of the US, so the opportunity to grow is enormous. BIDU owns 70% of the search market in China. Also, Chinese Internet stocks are also hot, and that’s been boosting BIDU stock. But these fundamentals are bad and continue to get worse. |
One Year Chart |
 Sales growth fell from 20% 2QtrsAgo to 10% last qtr. Profit growth was -40% last qtr. Profit estimates just got gashed across the board. The lowering of estimates was so bad that the 2QtrsOut est you see here fell from 72% to -20% in just one qtr. Meanwhile, the stock has been trending up with the rest of the Chinese Internet sector. I can tell you a lot of other Chinese Internet stocks are growing profits briskly. Analysts even have a negative Estimated Long-Term Growth Rate on this stock -12%. This number was negative last qtr too. |
Fair Value |
 With all the red, this stock still has a P/E of 46. My Fair Value is 35x earnings, or $149. Here’s how much Annual Profit Estimates declined since last qtr:
2016 from $5.71 to $4.25 |
Bottom Line |
 Baidu has been a fantastic stock the last decade, and I owned it from 2006-2015. Now management is focused on acquiring other companies and assets that don’t correlate to its search engine model, and this has hurt profits. But Baidu is the King of Search in China and still has lots of room for growth in that area. I have BIDU on the radar, but I want to see Annual Profit Estimates increase before I get back in. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
