Time to Bail on Baidu?

Baidu (Nasdaq: BIDU  ) has another analyst getting cautious.

Credit Suisse analyst Wallace Cheung became the latest Wall Street pro to sour on China's leading search engine. Cheung is downgrading the stock -- from neutral to underperform -- and dramatically slashing his price target.

Cheung now sees the stock at $83, well below his earlier target of $118.

You remember that scene in Airplane, when folks are lining up to beat up a hysterical passenger? This one?

"I've got to get out of here," the seated passenger screams, as folks telling her to calm down are smacking her around.

That's what it must seem like to be a Baidu investor these days. Cheung may be wielding a baseball bat, but investors had to go through Jefferies with a revolver, ThinkEquity with a wrench, and Deutsche Bank donning boxing gloves before that.

Cheung is yet another analyst concerned about the growing popularity of Qihoo 360's (NYSE: QIHU  ) fledgling search engine. He also raises some bearish concerns about mobile monetization.

Yes, Baidu is making inroads in mobile search, but will it ever move the needle? Cheung estimates that mobile search is already generating nearly a third of Baidu's traffic, but it's only accounting for 2% to 3% of its overall revenue. What will happen as more people in China migrate to smartphones?

It's funny. Closer to home, the same trend didn't stop Google (Nasdaq: GOOG  ) from hitting new all-time highs on Friday. It should also be noted that it was Google that Qihoo 360 replaced when it rolled out its own search platform this summer.

Cheung is still unimpressed, and he's slashing his profit estimates over the next two years.

That is troubling. Analysts are making it a point to issue bearish calls on Baidu just ahead of this month's third-quarter report. There may be comfort in knowing that Wall Street is a serial low-baller here. Baidu has landed ahead of analyst profit forecasts in 13 consecutive quarters. However, there is too much agreement among the naysayers these days.

Baidu will have plenty to prove -- and even more to refute -- when it reports later this month.

Betting on China
If you want to know more about Baidu's risks and opportunities, The Motley Fool has published 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 check it out now.

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 and Google. 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.


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