Baidu.com (BIDU) Gets Too High

Baidu.com (BIDU) hit a 52-week high of almost $194 today. That puts the shares up over 110%. And, the company has a market cap of $6.4 billion. That is 49 times trailing sales. Google (GOOG) trades at less than 14x.

Baidu has the lion’s share of the search market in China, but it does have some real problems. First, it estimates that its revenue for the current quarter will be $50 million. That is an indication that the search business is not nearly as robust in China as it is elsewhere although the company has a huge number of people online. And, there is no guarantee that this dynamic of low yield on the Chinese search market will change.

Another potential head wind for Baidu is that Google will go to great ends to knock the company off its perch as No.1 in China. The big US search operation has just set up a partnership with Sina (SINA), the largest web portal in China. Google seemed impressed with the deal as well it should be. The company told the AP: "Sina is the most influential portal in China and a household brand in China’s Internet industry," said Kai-Fu Lee, vice president of Google and president of Google Greater China.

Baidu’s share of Chinese searches at 55% is about double Google’s. But, it is not a safe bet that it will stay that way.

Douglas A. McIntyre can be reached at [email protected]