This article will analyze four tech companies to see if they have the potential to be big winners over the next decade. Each of these companies has traded on high volume recently, suggesting increased investor interest. Please use this analysis as a starting point in your own research.
Baidu Inc. (BIDU) Baidu has a market cap of $44.82 billion with a price-to earnings ratio of 49. The stock has traded in a 52-week range of $100.95 to $165.96. The stock is currently trading near the top of its 52-week range at around $130. This quarter's revenues are expected to come in at $662 million with an EPS of $0.73. This time last year, Baidu earned $0.47 per share, which means the company is seeing approximately 50% earnings growth. The last four quarters have seen earnings surprises of 11%, 4%, 9%, and 1.2%, so Baidu has a history of showing upside in its EPS.
Baidu is an established company and is the only Chinese stock that I will recommend. The company has been profitable in every year since 2003. In 2011, the company had a return on invested capital of 27%, showing that the China-based internet projects, ad revenues and sales initiatives are being managed well by Baidu. Investors have faith in this company and bid the stock up by 20% over the last 52 weeks and by over 400% over the last three years. After the company increased its year-over- year quarter net income each quarter last year, it is apparent that Baidu is still enjoying rapid earnings growth. I rate Baidu as one to consider given its substantial profit margins, which remain consistent around 46% mainly due to advertising.
Open Table Inc. (OPEN) Open Table has a market cap of $1.1 billion with a price- to-earnings ratio of 58. The stock has been trading in a 52-week range of $35.6 to $118.66. The stock is currently trading around $47. By comparison, web property developer and manager IAC/InteractiveCorp (IACI) operates the same type of internet business and competitive conditions as Open Table. IACI currently trades around $41 with a market cap of $3.4 billion and a price- to-earnings ratio of 18. For Open Table, analysts are estimating $0.3 per share in earnings for the current quarter and $0.34 for next quarter, ending March 2012. Last year's total revenues are coming in at $139 million, which will be reported in the next call, while fiscal 2012 earnings are expected to come in at $170 million or approximately 15% growth.
Open Table is an established internet company that has posted a profit in six out of the last seven years. In 2011, the company increased its year-over year quarterly revenue growth at a 40% rate and earnings at a 5.8% rate. The company’s stock price has been volatile and is currently near its 52-week low. I think Open Table is a safe stock even though its momentum has slowed. I believe that Open Table will continue to be a profitable company, but would wait for the stock price to stabilize before purchasing shares. I think Open Table is a great candidate for further research.
Sirius XM Radio Inc. (SIRI) Sirius has a market cap of $7.6 billion with a price-to- earnings ratio of 50. The stock has traded in a 52-week range of $1.27 to $2.44. The stock is currently trading around $2. One of Sirius XM’s competitors is Dial Global (DIAL), which is formerly radio-based competitor Westwood One. Dial is currently trading around $4 with a market cap of $20 million and a negative price-to -earnings ratio. On the earnings front for Sirius, analysts expect $0.01 in earnings for the current quarter as well as $0.01 for the March 2012 quarter. Fiscal 2011 earnings are expected to come in at $0.06, with 16% growth next year to $0.07 per share. Revenues for fiscal 2012 should come in around $3.4 billion, representing 12.5% growth over fiscal 2011's revenue estimate of $3 billion.
Sirius XM has been in an upward trend. As for capex, the company has completed building its infrastructure and should be able to reduce costs going forward. The company continues to reaffirm its guidance of 10% revenue growth and free cash growth upwards of 75%. Sirius XM has a lot of debt, with $3 billion on its balance sheet, but should be able to pay down debt with the additional cash added to its current $600 million. Cash flows are coming in at $550 million per year on an operating basis. Investors like what they see in Sirius and have bid up the stock price by 5% over the last 52 weeks. Additionally, I don't see Pandora (P) as a serious threat, given that it can co-exist successfully alongside Sirius. I consider Sirius a great candidate for sophisticated investors looking for a dominant industry player.
Renren ADRs (RENN) The stock has traded in a 52-week range of $4.5 to $24.00. The current stock price is under $4. Renren is a Chinese social networking company that has been dubbed China’s Facebook. The stock first traded on May 4, 2011 and closed the day at $18.01. The market opening was tainted because just days earlier it was discovered that the company had over reported the amount of people using its network. From then on, it has all been downhill for this company, including its share price. Significant questions remain about the company, and, on a more macro level, there have been a history of Chinese startup companies misrepresenting facts about themselves. Unfortunately for Renren, it is an unproven company that has no history of being profitable. Investors seemed to have caught on to a trend, and since its IPO the stock price has dropped by 70%. Analysts are forecasting significant revenue growth, however, which means this could be a name to keep your eye on. Fiscal revenues for 2011 are expected to total $118 million, while fiscal 2012 revenues are expected to jump to $177 million. Analysts also expect the company to breakeven for fiscal 2012, despite anticipating a loss of $0.01 per share in the current quarter and for the quarter ending March 2012. This is one to keep your eye on for consistency, and to determine if management can meet or exceed expectations over the next decade.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.