With shares of Baidu (NASDAQ:BIDU) trading at around $94.72, is BIDU an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Moveme...
With shares of Baidu (NASDAQ:BIDU) trading at around $94.72, is BIDU an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Baidu is an easy winner for search in China: it’s gaining in ground in mobile, and it’s now also the largest online video platform in China. Despite Q1 margin declines, margins are still solid, and year-over-year revenue and earnings were impressive. However, revenue and earnings declines on a sequential basis. That makes the story a little more difficult to read. In these situations, it’s often better to look at the big picture. And in this case, revenue and earnings have consistently improved on an annual basis. In addition to these positives, valuation is fair. Baidu is trading at 19 times earnings while the industry average is 21 times earnings.
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!
On the negative side, costs have also increased. These costs have related to infrastructure, marketing, R&D, and online video platform. Looking ahead, Baidu will increase spending to improve its mobile position. Another negative is increased competition. Current competitors include Sina Corporation (NASDAQ:SINA), Sohu.com Inc. (NASDAQ:SOHU), and Qihoo 360 Technology Co. Ltd. (NYSE:QIHU).
The chart below compares traffic performance. Pageview-Per-User, Time-On-Site, and Bounce Rate (one page per view) are all based on the past three months. Note: Weibo.com is owned by Sina.com, and 360.cn is owned by Qihoo.com.
Global Rank
China Rank
Pageviews-Per-User
Time-On-Site
Bounce Rate
Baidu.com
5
1
-8.73%
-7.00%
+2.00%
Sina.com
3444
658
-3.52%
-7.00%
+5.00%
Weibo.com
27
6
-4.73%
-3.00%
+3.00%
Sohu.com
50
10
-4.26%
-2.00%
+6.00%
360.cn
7
12
+4.60%
+18.00%
+3.00%
The chart below compared fundamentals for Baidu, Sina, and Sohu.
BIDU
SINA
SOHU
Trailing P/E
19.59
125.68
29.91
Forward P/E
15.20
32.55
18.64
Profit Margin
44.21%
5.88%
7.71%
ROE
44.08%
2.81%
14.13%
Operating Cash Flow
N/A
N/A
376.06M
Dividend Yield
N/A
N/A
N/A
Short Position
N/A
2.60%
8.30%
Let’s take a look at some more important numbers prior to forming an opinion on this stock.
T = Technicals Are Mixed
Baidu has performed well over three-year and one-month time frames. However, it hasn’t performed well over a one-year time frame or year-to-date. Most importantly, it has underperformed its peers for every time frame listed below.
1 Month
Year-To-Date
1 Year
3 Year
BIDU
9.59%
-5.55%
-17.90%
35.06%
SINA
28.77%
18.62%
12.16%
64.15%
SOHU
31.30%
33.08%
50.21%
42.21%
At $94.72, Baidu is trading above its 50-day SMA, but still below its 200-day SMA.
50-Day SMA
88.57
200-Day SMA
95.03
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!
E = Equity to Debt Ratio Is Normal
The debt-to-equity ratio for Baidu is weaker than the industry average of 0.10, but it still qualifies as normal.
Debt-To-Equity
Cash
Long-Term Debt
BIDU
0.40
5.39B
1.90B
SINA
0.00
681.93M
0.00
SOHU
0.19
951.67M
270.50M
E = Earnings Are Strong
Revenue and earnings have consistently improved on an annual basis.
Fiscal Year
2008
2009
2010
2011
2012
Revenue ($) in millions
461
652
1,171
2,248
3,580
Diluted EPS ($)
0.44
0.63
1.53
3.02
4.79
As stated earlier, year-over-year numbers are impressive, but sequential numbers are cause for concern.
Quarter
Mar. 31, 2012
Jun. 30, 2012
Sep. 30, 2012
Dec. 31, 2012
Mar. 31, 2013
Revenue ($) in millions
677.10
858.80
994.60
1,017
961
Diluted EPS ($)
0.85
1.24
1.37
1.28
0.95
Now let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
T = Trends Might Support th