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Baidu Sending Mixed Signals

|Includes: Baidu, Inc. (BIDU)

I remember it like it was yesterday. I had met this girl and was instantly attracted to her. She was cute and seemed like she would be fun to get to know. One night I was heading over to a friend's house to watch the NBA playoffs and she told me she was planning on going over too. At some point during our text flirting, she told me, "Maybe you can try out your hand-holding skills tonight" - with the winky smiley face and all.

You better believe I was excited. I was still fairly innocent and holding hands was a big deal to me. The only problem was that she never showed up, signaling to me that she was really wasn't going to be a good prospect at all. The next day, though, she texted me again, wanting to hang out.

This is a little bit about how I'm feeling about Baidu right now. The company is surging right now on the back of a 59% increase in revenues and a 24% increase in net profit from this time last year. Pretty exciting, right? They're sending you all the signals.

But then CFO Jennifer Li makes it awkward when she reports that the company expects no absolute profit growth this year as they are ramping up sales and marketing expenses, especially in promoting their mobile services. What the heck are we supposed to do now? Analysts showed their enthusiasm by slashing their profit growth estimates for the year from 31% down to 5%. Just like that girl went from being a 10 in my book to a 3. We can have a good time, just don't mess with my head.

In the end, though, she told me the only reason she didn't show up was because she chickened out. I ended up hanging out with her again. And then we dated for a few months, after which she ripped my heart out and made me watch her feed it to the neighbor's dog--OK that's probably where our little analogy ends...

Let's just say that it's not surprising that investors are confused right now about what to do with Baidu. However, its magnetic pull will eventually overcome them in the end. After all, maybe Baidu is just being conservative. They'd rather under-promise and over-deliver than do the opposite.

Let's just hope that aggressive spending pays off and we have something more exciting to look forward to next year.

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