Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Another Analyst Is Hating on Baidu

Baidu (Nasdaq: BIDU  ) has gone from dot-com darling to dot-com dissed.

Jefferies analyst Cynthia Meng is the latest Wall Street pro to sour on China's largest search engine. She's slashing her price target from $135 to $125, while also lowering her firm's rating on the stock from buy to hold.

Why? You know why. Trumpeting the same bearish theme raised by ThinkEquity's Henry Guo last week and Deutsche Bank before that, Meng is concerned about the pesky presence of Qihoo 360 (NYSE: QIHU  ) as a search disruptor.

Meng feels that Baidu may come up short in its next quarterly report, noting that the page-view traffic on Baidu's search hub has fallen by 4%.

There are a few problems with that assumption. For starters, Baidu has beaten Wall Street's profit targets for 13 consecutive quarters. In other words, analysts have perpetually underestimated Baidu's earnings power. Another factor to consider is that the handful of analysts that have turned on Baidu in recent weeks are also lowering their own estimates. Three months ago analysts were betting on a profit of $1.31 a share in the third quarter. Now those same pros are looking for net income to clock in at $1.29 a share.

That's not all.

Qihoo didn't roll out its search engine until it booted Google (Nasdaq: GOOG  ) as its provider in August. Qihoo's reach is wide with its popular Web browser and anti-virus tools, so the move makes sense. However, we don't know if this will be novelty bump -- one that has pushed Baidu's market share down from 80% to somewhere between 75% and 80% -- or a troublesome trend.'s (Nasdaq: SOHU  ) Sogou has had several quarters where the small search engine grew faster than Baidu. Technically, that means that it's gaining on Baidu, but it's so far away that it doesn't make a difference.

Investors should approach this situation with caution. Buying into China has always been risky, and now there's the risk of disruption. However, cynics that have argued that Baidu is too expensive finally have the company trading at a forward earnings multiple in the high teens.

The upside and downside have never been greater.

Betting on China
If you prefer a safer way to grab some overseas sizzle, a new report details three American companies destined to dominate the world. It's a free report. Want it? Get it.

There's also a premium report on Baidu, diving deep into China's dot-com darling. The premium research comes with a year's worth of updates. Click here to get started.


Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Baidu and Google. Motley Fool newsletter services recommend Baidu, Google, and Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2040491, ~/Articles/ArticleHandler.aspx, 12/1/2015 8:36:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated 10 hours ago Sponsored by:
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASD 5,108.67 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

11/30/2015 4:00 PM
BIDU $217.97 Up +12.39 +6.03%
Baidu CAPS Rating: ****
GOOGL $762.85 Down -9.12 -1.18%
Alphabet (A shares… CAPS Rating: ****
QIHU $67.90 Down +0.00 +0.00%
Qihoo 360 Technolo… CAPS Rating: **
SOHU $50.25 Down -1.32 -2.56% CAPS Rating: ***