Baidu - Overvalued?


Registered Member
China's search leader has relegated Google to a distant No. 2 in the world's most populous nation. In the U.S., Baidu translates into "hot stock" -- or at least it should. The company's U.S. stock has been No. 1 on IBD's weekly IBD 100 list of top stocks every week since Aug. 27. From April to November, the stock quadrupled. That's what happens when you dominate the market with the biggest upside; China has by far the most people -- and just 12% of them are online. Talk about growth potential. Many other Chinese tech firms traded in the U.S. are in the same boat, but not like Baidu. In early December, it became the first Chinese company added to the popular Nasdaq 100 index. The company has said it plans to enter the e-commerce field; it's also entering Japan. Since 2004, its annual per-share profit has been 11 cents, 31 cents and $1.24. It's expected to end 2007 at $2.30, and analysts forecast $4.07 for 2008. By the way, the term baidu means "hundreds of times," but there's a longer story behind the name -- Baidu might help you search for it online.
I can't help but think that Baidu is grossly overvalued due to its parallels to Google and the fact that it's Chinese. Is Baidu really worth $13.14 billion, being a company that provides only a primitive search engine and links to illegally download music among little else? Baidu was recently acquitted from a lawsuit accusing it of copyright infringement because the Chinese court dismissed it. Is the Chinese government's support enough to ensure its spread and success in international markets?


For a Free Scotland
I think that the recent investment belief that China is the place to put your money is so rabid that it's brought a glut of investors into the mix, who are jacking up the stock price. I don't think it's worth that, however there are many investors who have invested in China and gotten excellent returns think that high tech will be much like manufacturing.

I think they will learn that this is not the case.
For any long term investor, I think you're right. Baidu isn't as perfect as the market wants it to be. The support of China can only push it so far before it falls on it's face.

Short term investors (especially those who popped in early) are going to see great returns though, theres no doubt about that. Which is another reason why the price just keeps going up. I'd say cash in now, wait a bit then drop the load.

But hey what do I know, I'm no broker.