| Stock (Symbol) | Stock Price | |
Baidu.com (BIDU) |
$158 |
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| Data is as of | Expected to Report | Sector |
May 7, 2014 |
Jul 21 – Jul 25 |
Technology |
| Sharek’s Take | ||
 Baidu has been investing heavily in R&D to improve its mobile ad platform, this has taken a toll on profits. But last quarter we may have seen the light at the end of the tunnel. The company had “only” a 58% increase in R&D, which is down from 80% 2QtrsAgo and the 78% in 2013. The unexpected savings helped BIDU beat the street last qtr and post 22% profit growth. If R&D spending will continue to curtail, Baidu could be in for a windfall of profits. Sales are set to increase from $32 billion last year to $49 billion this year. If R&D spending could subside, profits could zoom again. At this point I’m being cautious and not counting on this happening right away, but 2015 should be a banner year for profits, and my upside to 2015’s Fair Value is 42%. |
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| One-Year Chart | ||
 This stock has been in a trading range for most of the past twelve months. Honestly, the pop from $100 to $175 around ten months ago took me by surprise because the qtrly profits didn’t look great. Estimates currently don’t look great either. |
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| Earnings Table | ||
 BIDU’s sales jumped 59% last quarter, and it would have been marvelous had profits grown at that rate. Still, the spending on R&D is paying off and BIDU did beat revenue estimates because of this.The company whipped earnings estimates by 20 cents, which was due to the conservative spending. It wasn’t sales that helped BIDU beat, they came in just shy of forecasts. Annual Profit Estimates increased a little bit. Note BIDU is scheduled to earn $10 in 2016. A 35 P/E would be a $350 stock. Quarterly profit estimates are weak, next qtr’s increased a little bit. 58% sales growth is expected next qtr, only 7% profit growth. |
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| Fair Value | ||
 BIDU is selling right at its 2014 Fair Value, but there’s healthy upside to 2015. Also, all of this data assumes lots of spending on R&D. If that spending slows then profits could flow again. |
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| Ten-Year Chart | ||
 That 2014 expected profit growth of 11% doesn’t look that great. Profit growth in 2015 is expected to be 40%. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
11 of 26 |
Baidu.com is fairly valued right now, but another qtr of reduced R&D spending could make the stock move higher. Even if that doesn’t happen there’s ample upside to 2015’s fair value. |
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Aggressive Growth Portfolio
N/A |
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