Can Baidu.com Recapture Its Earnings Mojo? (BIDU)

After today’s close we’ll get to see earnings out of Chinese internet search leader Baidu.com, Inc. (NASDAQ: BIDU).  The estimates from First Call are $0.71 EPS on $77.1 million in revenues.  Last quarter, the company gave guidance of $74.7 million to $76.7 million in revenues and EPS targets around the time were $0.70 EPS.

Next quarter estimates are $0.64 EPS on $77.01 million in revenues. Estimates for fiscal 2008 are $4.15 EPS on $435.48 million in revenues.

Options traders appear to be braced for a move of up to a range of $15.00 to $18.00 in either direction.  Baidu’s chart has been out of its explosive uptrend for more than a month now and shares have actually pulled back some $150.00 from highs.  To make matters more interesting, Baidu has been spending recent trading sessions under its 200 day moving average that is currently listed as $254.68.  The 50-day moving average is all the way up to $330.57.  Recent lows were roughly $225.00 in recent days.  As of last look, the short interest for January-end in Baidu shares was listed as 3.234 million shares, up almost 40% from mid-January levels. 

When this stock was busy going ballistic last year we noted how the valuations were becoming similar to the old tech-bubble days.  Even after the huge pullback that has been seen, the stock is not cheap by most standards.  With a $8.4 Billion market cap, this trades at 105-times current earnings and almost 60-times projected 2008 earnings.  On a revenue basis, this trades at 36-times current revenues and trades at 19-times projected 2008 revenues.   The question is how much traders are willing to pay for one of the greatest internet growth stories in China.  That answer varies from source to source and from trader to trader.

There can always be the duel of which will matter most between high valuations and a huge sell-off, but we still would think the company will have to beat earnings projections handily and maintain strong guidance to support the current share price and valuations.  Analysts have an average price target north of $379.00, which is still roughly 50% higher than today’s prices.  Baidu.com, Inc.’s 52-week trading range is $92.80 to $429.19.

In the Year of the Rat, Baidu better make sure rats aren’t chewing on the fiber optic cables in China.

Jon C. Ogg
February 13, 2008