The revenue and earnings projections are great but during the past six months and the market as measured buy the Value Line Index was down only 4%, Baidu was down 23%. This graph provided by Barchart shows just how far the stock has dropped recently while the market seems to be rising:
Baidu provides Internet search services. The company offers a Chinese language search platform on its Website, Baidu.com and a Japanese language search platform on its Website, Baidu.jp.
Its search services enable users to find relevant information online, including Web pages, news, images, documents, and multimedia files through the links provided on its Web sites. It sells its online marketing services directly, as well as through its distribution network. The company was formerly known as Baidu.com and changed its name to Baidu in December 2008. Baidu was founded in 2000 and is headquartered in Beijing, the People's Republic of China. (Yahoo Finance profile)
Factors to Consider
Technical indicators by Barchart
The stock has a 48% Barchart technical sell signal and that is in agreement with a Trend Spotter sell signal. The issue is trading below its 20-, 50- and 100-day moving averages. The price has fallen 6.2% in the last month and is 24.73% off its one-year high. This downward momentum results in a 38.59% Relative Strength Index. The stock recently traded at $116.03 which is below its 50-day moving average of $118.43.
Wall Street is following this issue and 22 brokerage houses have assigned 29 analysts to make projections. The analysts think revenue will grow by 54.4% this year and another 40.8% next year. Earnings are estimated to increase by 55% this year, 35.5% next year and continue by an annual rate of 39.98% over the next five years. The P/E is 33.91 which is about twice the market P/E of 15 but not out of line for a stock with these growth projections.
The company has good cash reserves and an A strength balance sheet. The customer count is up and so is the revenue per customer.
The professional analysts have issued 13 strong buy, 12 buy, four hold and no underperform or sell recommendations to their clients. Analysts feel if their projections are correct investors should see an annual increase in price in the 27% to 31% range for at least five years.
I gauge the individual investor's sentiment by the opinions they give on
and 5,045 readers gave the stock an 87% vote of confidence to beat the market. Short interest seems to be growing from a low of four million shares in mid-May to almost seven million shares short recently. The stock gets a B in
Performance Against its Peers
While BIDU was down 22% in the past year,
was up 24%,
was up 16% and
was up 52%.
Google was rated A by
. Analysts project revenue will be up 46.9% this year and another 26.7% next year. Earnings are estimated to be up 16% next year and continue to increase by 23.16% for the next five years.
Amazon was rated C+ by
. Revenue is projected to be up 30.5% this year and another 26.4% next year. Earnings are expected to increase by 209.1% this year and continue to increase annually by 33.6% for the next five years.
eBay was rated A by
. Revenue expected to increase by 20.3% this year and increase again next year by 14.9%. Earnings should be up 16.2% next year and average an annual increase of 13.23% for the next five years.
: I have a hard time justifying why Baidu is down and the rest of its peers are up. The stock has a solid balance sheet and a business plan aimed at the growing Chinese and Japanese online markets. With an annual earnings growth projected to increase by 39.98% over the next five years it has the highest earnings projections by the professional analysts. I think the price is depressed and the short interest will soon have to cover.
Technically, it looks like the stock has bottomed when you look at the turtle channels and moving averages. Now is the time to buy in but always watch the turtle channel and moving averages in case I'm wrong and the short interests are right:
This article was written by an independent contributor, separate from TheStreet's regular news coverage.