Chinese Clouds Hover Over Baidu Earnings & Guidance (BIDU)

Baidu, Inc. (NASDAQ: BIDU) closed lower ahead of earnings, and the earnings report that looked nearly acceptable on the surface actually is literally killing the shares of the leading Chinese search engine. The company is trying to talk up a positive business report card, but the slow quarter ahead is taking its toll and investors are focusing on the premium valuation at this point.

Baidu reported earnings of $0.87 per share on a 75% revenue gain to $677.1 million.  We had estimates of $0.84 EPS and $677.37 million in revenue.  Again, it is the guidance that creates the concern: Baidu sees revenues in a Yuan-adjusted range of about $847.2 to $867 million, which is actually short of the Thomson Reuters consensus revenue estimate of $860.16 million.  Sadly, this is still 56% to almost 60% sales growth.

Baidu closed down 2.7% at $135.83 today, but shares are down $13.64 or 10% at $122.38 in the after-hours session against a 52-week trading range of $100.95 to $165.96.  Baidu’s market capitalization rate before tonight’s post-earnings drop was $47.4 billion according to Yahoo! Finance, and that was still over 13-times anticipated revenues for all of 2012.

Sometimes high growth just doesn’t quite cut it.  The cloud over Chinese companies which are public in America is certainly not helping the matter.

JON C. OGG