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Why Baidu Is Still a Buy

Stocks in this article: BIDU GOOG AAPL

NEW YORK ( TheStreet) - Baidu (BIDU) shares have soared since their IPO in 2005, but analysts believe the Chinese Internet company has much more room to run.

The average analyst polled by Thomson Reuters has a $188 price target on Baidu, and expects a long-term-growth rate of 44.8%.

Baidu, the Chinese Google (GOOG), is the dominant search engine in its home nation, where it has around 78% market share, and its lead has only expanded since Google left mainland China in 2010.

Baidu recently reported stronger-than-expected fourth-quarter earnings and gave robust guidance, boosted by continued strong growth in the Chinese Internet market. Baidu said it earned 93 cents a share on $710.9 million in revenue.

Piper Jaffray analyst Gene Munster notes that Baidu has a "significant growth opportunity," and believes it is similar to Google six to seven years ago. Munster rates Baidu shares "overweight" with a $202 price target.

Baidu has taken a very similar approach to Google, essentially copying the Silicon Valley tech giant step-for-step, but in a market with significantly more opportunities. "Comparing Baidu to Google when Google was at similar revenue levels, the path to continued mid double-digit growth appears clear for the next 3-4 years," Munster wrote in his research note.

Baidu is currently expanding into the small and medium enterprise (SME) market, with approximately 300,000 customers, according to Munster, around 1% of the local market. He believes there is significant opportunity in this space, with perhaps as many as 30 million small businesses in China. "While adding SMEs aggressively will likely cost more in sales costs than large advertisers, we believe the path to meaningful, sustained top-line growth exists for Baidu over the next 3-4 years," he noted, in his report to investors.

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