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The shares of Baidu (NASDAQ:BIDU) have slipped significantly since the company's latest earnings report. A high profile downgrade by an analyst, and other analyst actions, added to the downside pressure. Concerns were born from Baidu's decelerated revenue growth rate last quarter. Analysts' raised concerns that the company might not best monetize the mobile platform, and investors asked relative competitive questions as they bid down the stock. Still, considering BIDU's significant valuation discount to growth expectations, even if we temper them, there's a wide margin of safety seemingly built into this stock. As the situation stands, betting against BIDU seems to be a bit of a reach and probably a bad idea. Indeed, BIDU's demise has been greatly exaggerated, and the power of its market position and ability of its executive team perhaps unfortunately underestimated.

Baidu reported its most recent results at the close of last month. For its third quarter ended September, China's most important Chinese language Internet search provider reported revenue growth of 49.7%. Its dollar revenue equivalent result of $994.6 million exceeded the analysts' average estimate of $992.8 million. Baidu beat the analysts' EPS consensus estimate for the September quarter by $0.09 in earning $1.37 per share.

Sounds great I know, but the 49.7% revenue growth rate was down sharply from the prior quarter's pace of 60% and surprised investors. The market blamed the latest lull on slowing Chinese economic growth and on competitive threats. Baidu dominates search in China, with Google (NASDAQ:GOOG) a distant second. However, in August, Chinese anti-virus software provider Qihoo 360 Technology (NYSE:QIHU) launched its own browser and search engine. And BIDU has been criticized for being behind the curve in mobile, with Tencent and UCWeb chasing share in the space as well.

Still, even with competition reaching the market, it still seems a reach to bet against BIDU. After all, the Chinese Internet market has huge potential that is extremely difficult to overestimate. It's already the most populous Internet market. And even while falling short of past performance, BIDU's revenue growth was astounding in absolution and its EPS was Street beating.

So, analysts may be reaching in predicting BIDU's demise too soon, and underestimating Baidu's ability to adapt and respond to its competition. It retains a dominant market share of 78.6% of search in China, according to Analysis International, a Beijing based research firm. While the pie will be shared, it's growing quickly enough to serve more than the few companies it does currently. Even if Baidu stumbles, it could quickly recover because of its position. With a market capitalization of $32 billion and plenty of capital on its balance sheet, what's to stop it from acquiring technology where it may lack it?

Earnings estimates have come down a few pennies for the coming quarter and for 2013, but BIDU is still valued at just 15.3X the $6.04 EPS seen by the consensus of analysts on the Street. That compares well to the 27% EPS growth estimated for the same year by the consensus of analysts. And long-term growth (5-year) estimates are set at 39% (PEG of 0.4), according to Yahoo Finance. Even if we assume the company will manage just 15% growth over the next 5 years (a PEG of 1.0), BIDU would still be a stock worth owning. As a result, BIDU is a name I like for the long-term, and recommend buying on this latest weakness. I'll be picking up regular coverage of BIDU, so you may want to follow my column.

Source: Rumors Of Baidu's Demise Have Been Greatly Exaggerated