Baidu's (BIDU) Shares Set To Fall As Google Takes China Share

Baidu’s (BIDU) stock is up over 225% in the last six months. The Chinese search engine company has a market cap of almost $11 billion, even though its revenue in the last quarter was just above $50 million. The stock now trades at 67 times revenue.

All of that may be about to end. According to new data. Google (GOOG) made a big gain in search engine share in China during the second quarter.

Reuters writes that China is the world’s second largest internet market with 162 million users. The US is in first place, but probably not for long. In Q2, Baidu’s market share did not change much at about 58%. Google’s moved up 4 points to almost 23%.

And, Google claims that the numbers are getting even better for the US company. It has gained more market share in China after it announced its partnership with Sina (SINA), a major Chinese Internet portal.

Google is hinting that the market share distance between the two companies is shrinking fairly fast. "We are closing up the gap with them (Baidu)," one of the US company’s China executives told Reuters.

If that is true, Baidu cannot keep its current valuation.

Douglas A. McIntyre