Baidu.com, Inc. (ADR) (NASDAQ:BIDU)

CAPS Rating: 4 out of 5

Baidu is the leading Chinese-language Internet search provider.

Recs

1
Player Avatar glenncv (56.72) Submitted: 1/3/2013 9:56:20 PM : Outperform Start Price: $102.09 BIDU Score: +78.86

BIDU

-Founded in 2000 BIDU is the leading Chinese language internet search provider, serving more than 500,000 advertisers mostly small and medium size businesses.
-The company derives the bulk of its revenue by providing online advertising through an auction based, pay-for-performance service.
-Bidu ranks as the most popular website in China and among the top 10 in the world based on site traffic.
-BIDU controls more than 70% of paid search dollars spent in China and a larger share in terms of queries.
-The firm generates most of its revenue by providing paid search marketing to match small and medium size business in China with their potential customers.
-To drive traffic to its site, Bidu also offers a wide range of non-search service, such as music and online communities.
-Bidu will benefit from the rising number of Chinese using the internet.
-Paid search annual spending is expected to continue to grow at a double digit rates.
-Bidu serves 350,000 clients (presently) and there is 40 million registered small and medium size business in China.
-Bidu is also looking to enter the mobile search market and has started to collaborated with several smartphone makers and carriers to pre-install their search engine on their phones.
-Bidu is also entering online, video, travel, and real estate listing. They recently paid $306 milion for Qungr (a top travel search site

Entry Price and Fair Value Price

-Stock is selling for $90 and the earning per share is $4.46 this means the stock is selling at a P/E of 19.06 this is too cheap.
-My entry price is under $100. Most technology companies like BIDU should be selling at a minimum of 23 times Earnings. Here is my numbers: 23 * $4.46 (EPS)=$102.58 Entry price.
-My Fair Value Prize is $124.66, here is my numbers:
2013 Earnings estimate is $6.02, lets discount this by 10% in case of a miss on earnings I end up with and EPS of $5.42 times this by 23 times earnings and I get a conservative Fair Value Price of $124.66

-Cash & Short Term investments= $3413
-Total Liabilities= $1525
*numbers are in millions.

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