First off I'll get it out of the way, that I believe that the post earnings selloff was unwarranted. Of course you here that their margins are slowing and their spending too much to try and stay ahead. Lets not forget that QIHU is eating BIDU's lunch and taking their market share in leaps and bounds. Good arguments, but I still have not seen any real proof to warrant an 11% haircut yesterday.
This reminds me of GOOG back a few years ago when they were in the same situation. Needless to say we know how that worked out. BIDU is extremely oversold at these levels and should bounce quickly and drastically as soon as reality sets in. I have yet to see an analyst who is right more than they are wrong. It is like they throw an idea in the air and see if it sticks to their report or not.
Maybe its that I like the underdogs, its funny to declare BIDU as an underdog, when they are one of the most successful companies in one of the largest and fastest growth economies in the world. Well this underdog is run by a CEO that everyone loves to hate. That doesn't stop him from being in the top 3 richest people in China, and all because of BIDU. Now it seems to be a little premature to write the company and this extremely successful entrepreneur of for dead. They made it this far, and now they have a couple of Billion in cash in the bank to make sure they stay there. QIHU and the other parasites riding along could only wish to be in the position that BIDU is in.
As is always true in the market of successful investors, you hold your nose and dive in when there is blood in the street. This stands true with AAPL as well as BIDU. This is the time to buying these companies, not when they were 700 and 165 respectively. I guess as we get more and more people into these markets, they just take a little longer to learn the lessons that most of us have already learned.
It might surprise a lot of bears, but I am not going to be surprised when BIDU is knocking on the 115 door in short order. Bidu is going to use that cash to do something to protect their dominance, and it is way too much money for them to just use to hire new talent for new ideas. Look for either some kind of share repurchase with the shares this cheap or possibly an outside the box acquisition that no one is looking for. Mr Li is no fool and he has shown us this with the success of this company.
Look for support to hold around 95 and create a double bottom, and subsequently come off of that level with the same conviction that brought it there yesterday. There will be a lot shorts caught in this stock on the way up fueling the rally. I really liked the attempt at 110 after it pushed to 101 right after the #s release. All of the crazy trading yesterday did was possibly help put in a stronger double bottom along with the December lows. The heavy volume flow yesterday was the highest since the selloff back on August 23rd of last year. For that kind of volume and still didn't get back to December lows, somebody was doing some heavy buying. Could it possibly be that the same firms that are telling you to sell the stock are the same ones out there covering shorts or building a bigger position? No that can't happen can it? Wall street firms wouldn't do that. or would they?
I guess we'll all see when the time comes and the BIDU story continues to unfold. Don't count this company out just yet, the Chinese economy is just starting to accelerate again, and if the Shanghai market is any indication of how well it is growing, than I wouldn't bet against one of the biggest companies in the country. That would truly be foolish. Good Luck!!
Disclosure: I am long BIDU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am also long GOOG, AAPL and QIHU.