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Baidu (BIDU): the only company on Earth kicking Google’s butt. February 19, 2007

Posted by deminvest in BIDU Baidu, goog, growth stock, Internet stocks, investment, nasdaq, Nasdaq stock, stock I own, stocks.
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1) Because Baidu is cool. It is the Chinese Google. It is actually the only company on earth that is somehow kicking Google’s butt.

bidu2.jpg

2) Because Bidu is the most successful Chinese Internet Company. Growing fast: Qtrly Revenue Growth (yoy):111%, Qtrly Earnings Growth (yoy):400%.

3) Because baidu.com has the same business model of Google. BIDU is actually gaining Chinese market share from Google. China daily: “market share of Baidu rose from 51 percent in August 2005 to 62 percent in Beijing, Shanghai and Guangzhou, the three largest cities in China, while that of Google fell to 24 percent from 33 percent

4) Because Baidu has a relatively low Market Capitalization. I could buy the whole company for about USD 3.54 Billion (if I had the money). Considering that Ebay bought Skype for about the same ammount and Google got Utube for about haft of that figure, I think BIDU could be a target for them…

5) Bidu has still great room to grow revenues. It has very small revenue (108.04M) for the main search engine of the second largest Internet market in the world (. This revenue can grow very much as Chinese advertisers start investing more to gain Chinese customers who are become more affluent.

6) My friend at stockpix tells me it may be a good time to buy Baidu from technical analysis point of view: http://stoxpix.blogspot.com/2007/02/bidu-chart.html

But there also a coupple fo good reasons not to get involved with our BIDU – Baidu friend:

1) BIDU has expensive P/E: Trailing P/E:93.22, Forward P/E (full year ending 31-Dec-08) :36.51

2) BIDU is expanding to Japan. It is not nice that a company growing very fast in the fastest growing Internet market, is looking abroad. Could that mean they don’t expect their China business to grow fast enough? Strange…

Comments»

1. len - February 19, 2007

u told me once.. there are other more affluent markets and that’s the reason investors would try to reach that market if only they can with minimal cost and aiming for higher ROI potentials and u also commented on china as a somewhat volatile market.. strange system.. so why get stucked to one if a company had a choice.

2. deminvest - February 19, 2007

But I don’t have a choice… I like too much BIDU, also if you read the article I liked to (the references you were asking for🙂 ):

“Baidu ranks as the fourth most popular website in the world, after Yahoo!, MSN and Google.”

I think $ 3.5 B is cheap for such a website, specially considering the good figures and the huge growth…

3. deminvest - February 19, 2007

http://www.alexa.com/site/ds/top_500 to the right, another data source showing Baidu as n.4 world’s website

also interesting on Alexa:
http://www.alexa.com/site/ds/top_sites?cc=CN&ts_mode=country&lang=none
Google is only n.8 in China

4. Atlanta One - February 19, 2007

I own BIDU, the Chinese Google. They beat the eps projection by over 40% last quarter. In response to the article’s last paragraph:

1) Forward looking P/E is more imporatnt for an early stage company that is hitting it’s eps. Who cares what they did last year? 36 P/E for the hottest Internet company on the planet is cheap and they will beat their estimates again making it a 25-30 P/E.

2) They own the Chinese market. You say they have twice the market share of GOOG in a population that is fives times as large. So do you expect a market cap of 10x vs. GOOG??? If so that would be 144B x 10 or almost 1.5 trillion….nope BIDU is only 3-4B. So why not keep expanding. I applaud their strategic efforts and desire for growth. The article above does not address the number one issue w/ BIDU– they are in a decelerating growth phase due to their extreme market share ownership in China. If you listen to the last CC, the analysts are looking for more growth and Japan is a piece of the puzzle.

Not mentioned positive: They are looking at acquisitions. They are off their 52 week high by approx. 20% as of mid February.

– Gekko, Strong Buy

5. deminvest - February 19, 2007

1) True! Totally true!
Thank you for making even clearer to me what a good buy Baiidu is.
I am more and more convinced I will buy $1000 worth of Bidu at any price at market opening.

2) Google does not only have marketshare in USA. Google is global, market leader for Internet serches in the World, that makes quite stronger that Baidu, which still has to prove have it can attract visitors outside China. Also, it doesn’t really matter how many people watch a website, what counts the most is how much money can those visitors spend online and offline. So I don’t expect to multiply *500 BIDU’s value. It woulb ok to multiply it *15🙂

3) I hope Baidu will avoid acquisitions:
a) They would make them using our money (printing more shares or using the little cash they have). Organic growth is much better because it is free.
b) I am buying because of the growth in China, if they need to buy internet companies outside China, it menas they are not very confident about the ability of China to substain Baidu’s growth. Not nice.

Regarding the decelerating growth, I think it is nonsense: Revenue Growth (yoy):111% is great and would be great even if it went to 80% next year.

one more thing: I don’t see why Japanese should use Baidu. They probably won’t.

6. deminvest - February 20, 2007

Ok, I got them:

I bought 10 BIDU Stocks at USD 105 each, spending $1050. Let the force be with me!

7. deminvest - February 21, 2007

I found some interesting articles about Google VS Baidu on:

http://www.typepad.com/t/trackback/16267944

I hope this trackback works, because I don’t know yet what a trackback is, even thos this WordPress Blog does have trackback itself.

8. deminvest - February 21, 2007

I noticed it does not work… Ok I’ll rather use an oldstyle classical link to this Google vs Baidu articles collection:

http://www.informationarbitrage.com/2007/02/google_vs_baidu.html

9. Gene - February 22, 2007

Thanks for the fundamentals. Interesting facts about Baidu. According to the charts, you made a great buy when you bought at 100.50. That appears to have been the long term bottom. There’s still a lot of pressure overheard, but should it clear, it should take off. There’s a chart on my blog. Good luck with your trade!

10. Hans - March 7, 2007

OK, but here’s another way of looking at things…

Remember that we’re in an inflated bull market. Many people are expecting a housing downturn and for the elastic band to break, since the US has $8 trillion in unsustainable debt…

If things turn down for real, they will turn fast. FAST. Why? Because stocks will drop, housing will keep dropping, and people will default on their mortgages and get massive margin calls. Revenue will drop, money will tighten, and interests will rise quickly. The downwards cycle will perpetuate itself from the beginning again. If there is even the INDICATION of this happening, the first things to be hit are advertising—stocks like GOOG will lose revenue very fast and their stock price will plummet because it is overvalued at such a high P/E.
(A huge percentage of google’s ads come from housing and mortgage ads, apparently, although that’s unverified).

If this happens, think about BIDU, with a price of 100 or so and a P/E of around 82 (think about it—82! That is ridiculously high and unjustified. Yes, sure, people think it’s a different market, but does no one remember only SEVEN YEARS AGO where all the internet stocks were so overbought, and they plummeted—but before that, everyone said “no, this is a different market now”. These stock prices are based on future revenue. How quickly we forget!)

BIDU will drop with GOOG, because it is primarily ad revenue, and that will be sucked dry very quickly. And when it falls, it will crash. Fast. People are just waiting with their fingers on the trigger.

That’s why I’ve bought ridiculous amounts of put options on BIDU for next year.

Don’t fool yourself that a major downturn isn’t coming soon—the US is being buoyed only by printing billions of $ of money each year. It can’t go on forever. You can’t live on money you don’t actually have.

At least hedge against the downturn and buy some put options. If I’m wrong, you won’t lose much. But if I’m right, you’ll at least have enough money to cover the losses of all of your other stocks.

11. deminvest - March 7, 2007

Hans, what you are writing does make sense. This market situation does scare me.

What is the name of the options that you bought?

I will look at them with great interest.

12. deminvest - March 7, 2007

Hans, I just read something really interestingconcerning what you wrote about “advertising going to be hit” for Google…

Well I think online advertising has to grow simply because business need to sell and we spend more and more time online. I read that US companies spend more money advertising on Yellow Pages that on the Internet. Now I wounder:

“When was last time you opened one of those huge, old and dusty books?”

13. moiliiliquarry - May 29, 2007

Thank you, deminvest. I came across this site while doing more reading about Baidu. I’m hoping to get my first BIDU shares soon … perhaps after a minor correction in the markets. If I can get BIDU under 115 that would be nice (for me). This stock is severely undervalued even at this P/E, but as Atlanta noted, it’s the forward potential that matters for a young co.

Btw, my favorite growth stocks are AAPL, GOOG, CROX, SPAR & BIDU.

14. deminvest - May 30, 2007

Thank you very much Moili.

I think today we saw a correction that may help you get your BIDUs. I usually don’t wait too much when I want to buy a stock because:

1) Either I am right, and great earnings for second quarter will boost Baidu’s price in a coupple months

2) Or, if I am wrong Baidu’s growth slow down. Unfortunately with slower growth, Baidu’s P/E would be too high to make sense and in that negavite scenario it is better to stay away from BIDU stock.

Thank you for your suggestion about other growth stocks. I was thinking about AAPL, but I am a bit scared by the new phone. I don’t know CROX & SPAR and will I look carefully into them, maybe writing a post if I can beat my lazyness🙂

15. moiliiliquarry - June 1, 2007

OK I haven’t been able to buy for the past couple of weeks but payday finally arrived hehe …

BIDU trading at 140 in afterhours right now. Think I’m gonna hold off until next week. The market has to take a breather sooner or later.

Plus I can’t buy a whole lot at once anyway, so I plan to add what shares I can from time to time, kind of like a DRIP system. It’s a tough call between the five companies I am bullish on. BIDU and CROX have relatively small market caps and floats (25 million each).

Might get a little of each.

16. moiliiliquarry - June 29, 2007

Finally did it. May have paid too much ($168) for BIDU. I started paying attention while it was around $93. Zoom zoom.

Also got FMCN (top advertising Co in China), AAPL and SINA (nice deal with GOOG) today.

A while back I was torn between BIDU and CROX, chose CROX. Oh well … CROX will do fine, but BIDU is a rocket ship.

Google is adding a Baidu-style search platform. Have you guys seen it? Does it make much difference?

17. deminvest - July 2, 2007

Moili, good luck for your Bidu shares! It is a great company.

Since I don’t know Chinese, I don’t really know about about the new platform… I have read it shows pictures connected with every search, but I can’t be sure.

18. moiliiliquarry - July 13, 2007

dem, i’ve linked to your site from my blog (moiliiliquarry.blogspot.com). Keep up the great writing!

19. Connor H - July 13, 2007

Bidu is a very interesting company… however, it is already priced to perfection! Look at its PEG!!! AND PE! ITS PEG is well over 2.0, while Google’s is right around 1.0, not to mention much lower PE. Google is the safer, more proven, and less over-blown company. I am confident google is the much better long-term bet over an over-hyped Bidu at almost a 3.0 peg… I REFUSE to pay over 2.0 for Peg… always has kept me out of trouble. Google is my favorite long… going to 1100 i think by 2010-

20. deminvest - July 14, 2007

Connor, I agree with you. Google is safer and better. Sill… I will keep my BIDU shares for 2 reasons:

1) I have them for free, thanks to my strategy.

2) Baidu is not expensive: Its market cap is $7B. Not very much for China’s online search leader. Consider that US search leader (Google) has 172 B market cap, doing 60% of its business in the US.

As China’s economy is approaching US, Baidu only needs to keep its leadership to become a giant similar to Google.

21. deminvest - July 15, 2007

Thanks Moili. Your Blog goes in dept on stocks more than I do, and you seem to be interested in some stocks that I also like. I’ll subscribe to your blog’s RSS

22. moiliiliquarry - August 2, 2007

Thanks Dem. I’ve been coming here quite often looking for a new story on the front page. Only tonight did I realize that all the action is in the comment areas. I don’t regret buying CROX instead of BIDU. (I’ve added more CROX along the way.)

Like a lot of people, I don’t think BIDU’s value can be measured in current revenues and earnings. It’s all about the future, as you said, and China is growing so fast. PLUS, the government is very protectionist about its top companies. That’s like having King Kong behind you in a street fight. BIDU looks cheap right now at $200 …

What have you bought lately?

23. deminvest - August 2, 2007

LOL Moili!

“King Kong behind you in street fight” sounds just great:

It is a perfect way to explain the government help factor that I did not mention.

Regarding the “Empty Front Page”, I apologize. It is all due to my amazing laziness. I bought some Blockbuster shares. Actually bought Netflix, then got scared by the fact that it is under pressure by its competitor Netflix and switched to Blockbuster… But I’ll try to win my lazy attitude and write about it on the homepage.

24. moiliiliquarry - August 2, 2007

haha laziness. It’s not laziness if you’re busy with the market. So how is the Blockbuster buy doing for you?

I used to like Netflix … then they ran into all kinds of problems as you said. I demoted NFLX from a B+ to a B- overnight. The CEO was on 60 Minutes last year, happy and optimistic about becoming the first mover on downloaded movies. Not sure if they’re executing on that quick enough.

I felt like getting more BIDU today but the market spooks me and I’m going to wait it out between now and the next earnings report for a nice dip. BIDU was at $195 today but I was sleeping. Market is 3:30 to 10 a.m. here.

25. I’ll buy 100 VanceInfo Technologies Inc. (VIT) Shares in 5 minutes « Democratic Investments by the people for the people - May 12, 2008

[…] Baidu, which is the only company on Earth able to kick Google’s butt. […]


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