Why Baidu (BIDU) Stock Is Higher Today

NEW YORK (TheStreet) -- Baidu (BIDU) was gaining 2.8% to $154.90 Monday following a positive note to investors from Pacific Crest.

In a note to investors Pacific Crest analyst Cheng Cheng said the Chinese search company is likely to report revenue in the high-end of its guidance in the first quarter. Baidu's guidance for the first quarter calls for revenue of between $9.24 billion and $9.52 billion. According to Cheng, "our conversations with industry contacts suggest the search advertising environment was slightly better than planned in Q1."

While Cheng believes Baidu will report revenue in the high-end of its guidance in the first quarter, the analyst says it likely won't continue through the second quarter. The increased revenue comes from video ad sales from iPartment4 and My Love from the Star, which may switch to other platforms as they chase "hot content."

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TheStreet Ratings team rates BAIDU INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BAIDU INC (BIDU) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BIDU's very impressive revenue growth greatly exceeded the industry average of 16.3%. Since the same quarter one year prior, revenues leaped by 55.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 71.33% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, BIDU should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • BAIDU INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BAIDU INC increased its bottom line by earning $4.96 versus $4.78 in the prior year. This year, the market expects an improvement in earnings ($31.71 versus $4.96).
  • Despite currently having a low debt-to-equity ratio of 0.46, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.71 is very high and demonstrates very strong liquidity.
  • The gross profit margin for BAIDU INC is rather high; currently it is at 66.01%. Regardless of BIDU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BIDU's net profit margin of 29.36% compares favorably to the industry average.
  • You can view the full analysis from the report here: BIDU Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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