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

This is an example of a bandwagon short- a few top fools did a thumbs down here (for reasonable reasons- which turned out to be flawed) and many people copied without doing due diligence.

The issue on this one is that when your profit is $1 it is very easy to have a P/E ratio in the hundreds or thousands. lots of the internet companies have low profit until they make a small tweak to their system that allows them to collect (such as Google and their advertising business). Suddenly their P/E seems very reasonable for a fast growing company. This does not happen in other industries with hard tangible assets with physical products- and students of the fundamentalists such as buffett and lynch (like me) may be fooled here if we are not careful. Buffett did warn to know the business and industry you are investing in... and the internet is a very unique business environment.

So for internet startups- it is very prudent to hold back on investing in them until they prove themselves with earnings- just be very careful of shorting them for absurd P/E ratios. P/E ratios in such a company mean nothing when earnings are close to zero but potential earnings within a year or two are much higher. If you want to short a company like this- I like to short on the basis of cashflow, debts or insolvency.

Just my opinion.

This stock is controlled by a government that can change the rules in 30 seconds. I don't doubt the company will do well as time goes by but I am looking at the metrics of the company and could see it getting hammered for unauthorised down loading of videos and music.
Could be a good candidate for Bear puts

You can pick price to earnings, price to free cash flow, or even price to sales and you can't find a way to make the valuation on this business make any sense. And assuming you could, what's the long term competitive advantage here?

Let me see.... is China search a potentially big market? I think "yes." Does BIDU have a large share of that market? "Yes." Will the market continue to grow? "Yes." Could they be bought? "No." Could they be shut down? "Possible." Probability? "Low." Google impact? "They're trying, of course, but not much success. The Chinese protect their own."

the only thing I see that may slow the growth is if Google does manage to make in roads through the mobile phone search engine useage,I dont forsee an immediate threat.Baidu is the leader and will remain the leader here for sometime.

I almost put this in my CAPS list in August when I bought it in the real world. DOH!

I use statistics to evaluate reported revenues and then forecast future sales, net income and eps. My analysis indicates that BIDU remains very undervalued if past trends continue. My forecast is:
REV - 76.5M
NET - 26M
EPS - .78
Fair Value - $440 today
12 month target - $1100
R^2 = 0.99

My net and EPS are based on the most recent net profit margin, 33.7%. My price estimate is based on a formula published by Ben Graham (Warren Buffet's finance professor)

There is certainly a lot of margin for error. And I expect that there will be a bumpy ride but this is one to buy and hold for a long time.

JMHO
Jag

A Chinese Google? Hard to beat. Initial "irrational exhuberance" for the stock got hammered out Jan/Feb 2006. Selling at a premium (foreward P/E 50+) but growth potential is obvious (revenue yoy 190%). Not a fly by night operation (1300 employees).

diaper full...no one has the stomach to change it

Google has given up the fight for now. E-Bay has picked as search engine of choice. #1 internet search engine of China. Yes, it's pricey, but projected growth is outragous at 65 to 75% according to which anylysts you believe. I've invested speculative money in this stock at $80.00 and I beleve it has a lot of room to run. Will be a bumpy ride, but I've "Cowboyed Up" for BIDU.

see ya at $1000 a share!

Shorting all the google, including the china and india ones.

This wanna-be chinese "google" will rob you blind. If you HAVE to play it, do options and watch it like a hawk. I prefer puts. Today, it dropped like a rock. Its a fast mover like goog and not for the faint of heart or longterm investor!

Ridiculous p/e reminiscent of the dot com bubble

Yipee Yahoo! A dip in price is a great time to buy. May the dogs of war gather and the grey clouds descend, for the sun will come out shining tomorrow. THis is a great stock that is only going to move strength to strength as it's market and revenues expand.

I believe this stock is just beginning its long ascent. It will perform better than Google because it is a Chinese corporation reaching out to the Chinese businesses and general population. The Chinese understand how their country thinks and operates better than the Western world which gives it a tremendous advantage.

Earnings play ... probably will get burnt with this. Though their earnings should show growth due to their recent acquisitions which should finally show up in the reporting. Still ... purely speculative.

Since Baidu to becoming the uniform search engine in China, similar to how Google is for the U.S., I have high hopes for this stock. The Chinese government is very pragmatic, despite the fact that they are COMMUNIST (which is always evil!!!), and I can't see them just suddenly crippling or destroying a major company like Baidu which will be beneficial for them. Even the chance that they will suddenly implement regulations to hinder Baidu seems low. One could argue that China is more capitalist than the U.S. in the sense of how lax it is in regulation. Like the U.S. market, China stocks are being driven down by fear rather than a company's real value. Once the fear is over, though, I expect this stock will be on the up-and-coming and we can already see the result of that. This is something I would hold buy and hold for five years if the market were to shut-down tomorrow.

Trying this one again...

China and the Internet are two emerging trends in which investors seeking high growth and corresponding profits should consider investing.

Put them both together and what do you have?

Baidu.