Stock (Symbol) |
Baidu.com (BIDU) |
Stock Price |
$200 |
Sector |
| Technology |
Data is as of |
| November 9, 2015 |
Expected to Report |
| Feb 9 – Feb 15 |
Company Description |
 Baidu, Inc. is a Chinese-language Internet search provider. Baidu serves 3 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. During the year ended December 31, 2011, it had approximately 488,000 active online marketing customers. Its online marketing customers consist of small and medium enterprises throughout China, large domestic companies and Chinese divisions or subsidiaries of large, multinational companies. In 5/2013, Baidu announced the acquisition of the online video business of Internet video provider PPS. Source: Thomson Financial |
Sharek’s Take |
 Baidu has been on a tear recently. The stock fell from $200 to around $135 during the Chinese Bear Market, which took Chinese stocks down during July and August. Then recently the Chinese stocks rallied and BIDU jumped from $135 to $200 in just a month. What’s surprising about the move higher is Baidu has had some serious declines in its fundamentals. Last qtr the company had profits fall 31% as quarterly and annual profit estimates got slashed. 2015’s estimate has dropped from $7.15 four qtrs ago to $4.98 this qtr. 2016’s from $9.49 to $6.77. My 2016 Fair Value on this stock is $203 per share, which is 30x current estimates, and is around the current price. Keep in mind estimates are declining, thus my target price could decline as well. I feel the swift surge in BIDU’s stock price is not warranted, and will remain on the sidelines at this time, but feel this is a core holding for growth investors with a long-term horizon. |
One Year Chart |
 The one-year chart is just flooded with red as Baidu management invests to grow its business. But we don’t know if these investments will pay off. Recently the company stated it would invest $3.2 billion over three years in online-to-offline businesses. These are coupons for savings like Groupon offers. But here in the U.S. that business has already peaked, and isn’t really profitable. Looking at qtrly Estimates, NxtQtr’s estimate has been cut in half the past 2 qtrs and the 2QtrsOut estimate has declined by more than 50% during that time. I’m so surprised the stock has surged. |
Fair Value |
 I owned BIDU from 2006 to 2015 and sold during the Chinese stock market crash this Summer as the stock was in a free-fall. My price target is $203, which is 30x 2016 profit estimates, and is what the stock is for selling today. Keep in mind that estimate has fallen from $9.49 to $6.77 in just four qtrs and could decline again. Still, upside is substantial for 2017 if estimates do not deteriorate. This company could make $10 someday, and then the $200 price will prove to be a bargain. |
Bottom Line |
 Baidu is the best big Chinese stocks to own, as it is the king of search in that country with more than 50% of the market. But recently the company has been pouring money into other ventures such as entertainment shows and online coupons and who knows if those investments will be worth the price.Today I feel BIDU stock is where it will be next year. I don’t own the stock at this time, and will wait for a decline to get back in. If you already own the stock I think it is a great company to buy-and-hold for the long-term, but as the ten-year chart shows the ride could be a bumpy one. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
