sneezed Thursday, and the entire
seemed to catch a cold.
Shares of the Chinese Internet company dropped as much as 12% in afternoon trading after investment bank JP Morgan issued a report saying that the company's third quarter should be merely in line with consensus estimates -- and somewhat below its prior forecasts.
Based on recent checks, JP Morgan now expects Baidu's revenue to be about $67.5 million, below the $67.9 million it previously forecast.
While seemingly a minor development, the adjustment was enough to knock the wind out of a highflying stock like Baidu, which has roughly tripled since the beginning of the year -- and still trades at more than 80 times forward earnings.
As Baidu began to plunge on word of the JP Morgan note, the rest of the tech-heavy Nasdaq follwed. The index has similarly been on an astounding climb, jumping more than 15% in under two months.
What's more, as Baidu recently worked back from its lows of the session, so did the broader tech index, which ended the day at 2772, down 1.4%.
Baidu shares closed down 10% to $308.78. Its volume of nearly 20 million shares was more than three times its average daily volume.
JP Morgan's revision may have been especially received as rough by investors, because the investment bank had just initiated coverage on the stock at the beginning of October with a $400 price target -- the highest on Wall Street.
Still, JP Morgan analyst Dick Wei wrote that the long-term prospects for the company are still bright. "Any share price pullbacks on the back of these short-term issues offer an excellent buying opportunity for the leading Chinese search engine," Wei wrote.
JP Morgan makes a market in Baidu shares.