Growth Ahead For Baidu: Recent Lull May Provide Excellent Opportunity

| About: Baidu, Inc. (BIDU)

Baidu (NASDAQ:BIDU) has come down with the market in the past few days, and it's beginning to look like a good opportunity. Last week, the company announced a deal with Dell (NASDAQ:DELL) that will launch tablet computers and mobile devices within the next few months. Baidu will develop and expand its mobile operating system. This is a great entry for Baidu into a Chinese market that has been dominated in the past by Apple (NASDAQ:AAPL) and Lenovo (OTCPK:LNVGY). It should also help Dell too.

Baidu is now trading at $141, off 15% from its 52 week high of $166. Take a look at the past year's chart, and you can see the trend is upward. Baidu recently fell to $125 during a tough August, but I'm not sure you'll get to that as an entry point anytime soon. Analysts are extremely positive on the company, with 26 of 31 analysts having some form of buy recommendation on the stock. The average price target is $189, with a range of $135 to $217. If you notice, we're just a few dollars from the bottom of that range.

Now everyone likes to compare Baidu to Google (NASDAQ:GOOG), and although they are similar, the Chinese search system is not exactly the same as the one here in the U.S. See the following links for some key stats on both Baidu and Google. As you can see, Baidu has a higher margin business than Google. Baidu is a little behind Google in its growth stage, so you will see a much more expensive valuation on Baidu until its revenues and earnings growth level off a bit. Baidu is expecting 80% revenue growth this year, while Google is expecting 30%. And next year's numbers are 53% and 21% respectively. Earnings per share estimates for the two follow the same trend.

Google is a great company and has wonderful growth prospects ahead, but Baidu is the better play if you want more growth. While Baidu's P/E of 64 may be lofty compared to Google's 18, the forward P/Es are just 32 and 12, respectively. And remember, Google's market cap is 3.4 times that of Baidu's. Baidu has a lot of growth ahead of it, and this recent lull in the stock may just provide an excellent opportunity for long term investors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.