Baidu Finds No Room for Shortfalls
Updated from 9:52 a.m. EST
BEIJING -- Baidu.com's (BIDU) shares were slipping Wednesday after the China-based search engine disappointed investors with its soft forecast.
In a damaging after-hours admission, management said the adoption of a new bidding system may leave its growth below the norm for the next two quarters.
The stock slid as much as 9% Tuesday as investors grew jittery leading up to its results, then shed another 4% following the release of the actual quarterly report. However, when the dust settled, selling pressure abated and the stock was lower by only 1.5% at $85.94 as trading got underway.Still, the pullback isn't a surprise in light of the stock's steep valuation. Baidu has recently traded above 50 times next year's earnings. At those lofty levels, market watchers saw little room for slip-ups. In recent months, Baidu's stock has been bid higher because, as China's leading search engine -- a title it has managed to wrest from global giant Google (GOOG) -- it's seen as a bet on the growth of the Internet in the world's most populated nation. Already, 123 million users are said to be online in China. On a conference call late Tuesday in New York, CEO Robin Li chalked up the weak outlook to a change made during the second quarter to Baidu's paid search algorithm, which encouraged bidders to pay more for better ad placement. The more sophisticated new system is similar to the one used by Google, allowing customers to make multiple bids to improve their placement.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV