Baidu Inc, (BIDU) ranks as the most popular website in China and is among the top five in the world based on site traffic as tracked by Alexa.com. BIDU is currently trading near its 52 week low of $100.95 and has been significantly oversold since April.
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Slowed growth in China and investor fear have allowed for an excellent buying opportunity in this Chinese internet company. Not only are earnings and sales projected to increase, but I would also bet that growth in China will pick up. I believe the last quote by IHS Global Insight's Mr Thornton says it best:
We do expect things to improve. However, it is not going to be a sharp V-shaped recovery but a slow and volatile one amid plenty of weakness in both the domestic and global economy.
To me a recovery in China seems inevitable; the only question is how quickly and by how much. Next year should be a steadily increasing GDP growth period for China, but I don't think many economists predict any type of drastic growth in 2013. Scanning through earnings reports and estimates, I have noticed that weaker Q3 earnings for many companies have reinforced the economic worry and slow growth fears.
Even with the weakness in China, BIDU is expected to have increased earnings per share and sales (see charts below). I do believe that Q3 will be a significant quarter for BIDU, so be sure to keep an eye on the earnings announcement on July 23rd.
| Earnings Est | Current Qtr. Jun 12 | Next Qtr. Sep 12 | Current Year Dec 12 | Next Year Dec 13 |
|---|---|---|---|---|
| Avg. Estimate | 1.12 | 1.31 | 4.58 | 6.35 |
| No. of Analysts | 14.00 | 14.00 | 27.00 | 26.00 |
| Low Estimate | 1.05 | 1.24 | 4.20 | 5.35 |
| High Estimate | 1.19 | 1.43 | 5.01 | 7.19 |
| Year Ago EPS | 0.72 | 0.84 | 3.02 | 4.58 |
| Revenue Est | Current Qtr. Jun 12 | Next Qtr. Sep 12 | Current Year Dec 12 | Next Year Dec 13 |
|---|---|---|---|---|
| Avg. Estimate | 853.28M | 990.08M | 3.51B | 4.95B |
| No. of Analysts | 15 | 15 | 23 | 22 |
| Low Estimate | 789.20M | 890.30M | 3.19B | 4.32B |
| High Estimate | 872.74M | 1.07B | 3.76B | 5.67B |
| Year Ago Sales | 528.36M | 654.70M | 2.30B | 3.51B |
| Sales Growth (year/est) | 61.50% | 51.20% | 52.50% | 40.90% |
The long-term outlook for BIDU is still positive, especially with earnings and sales aligning with future projected growth. Why not buy a growth stock in a down period that is projected to maintain its growth going forward? The negativity and global economic worries have actually given this company less risk because the estimates have not changed much and the positive future outlook remains intact.
Disclosure: I am long BIDU.
