Baidu Should Be Used to the Last Laugh By Now

It is Baidu (NASDAQ: BIDU  ) -- and not Qihoo 360 (UNKNOWN: QIHU.DL  ) -- hitting new all-time highs today. 

This kind of scenario didn't seem possible two summers ago after Qihoo 360 used its muscle as the dot-com behind China's leading Internet browser and online-security software to roll out a search engine of its own. Qihoo 360 initially took market share from the lesser players, but when it began nibbling away at Baidu's market dominance, the naysayers pounded the stock several months later. 

Shares of Baidu bottomed out at $82.98 in April. Short interest peaked in mid-June when more than 15.5 million shares were sold short while the stock was still trading in the double digits. We know how well things played out for those boo birds. Baidu went on to take off after posting strong quarterly results and making acquisitions that helped make it a major player in video and mobile. The stock has now more than doubled since bottoming out eight months ago.

Baidu didn't vanquish Qihoo 360 to get here. In fact, Qihoo 360 has done quite well for those that bought in last year when it was starting to gain traction. Revenue soared 124% in its latest quarter, and that's now that its getting its feet wet in terms of monetizing its search platform. Qihoo 360 begins this week 15% off its October highs, but it has more than tripled over the past year. Baidu investors can't say that.

But this isn't the first time that Baidu rose to the occasion after being dismissed by the investing community. Five years ago the stock fell all the way to what would now be a split-adjusted price of $10.05 after a Chinese television show uncovered that Baidu was accepting ads from unlicensed medical companies to promote their questionable pharmaceuticals through Baidu's paid-search platform.

Baidu owned up to the allegations and suspended advertisers that were accounting for as much as 15% of its business. This is the kind of blow that would obliterate some companies, but Baidu became more vigilant and turned into an even better investment. Baidu lived to have the last laugh and the stock is now a 16-bagger just five years later.

Keep this in mind the next time Baidu proves mortal, investors rotate out of Baidu, and the short sellers swoop in. There may very well come a time when the circumstances hitting Baidu have a lasting impact, but for now it's only meant some pretty amazing buying opportunities for those taking advantage of the pessimism.

Get our top tech picks for your portfolio
Our top technology analyst recently infiltrated one of Wall Street's most exclusive gatherings... and left with three incredible investment opportunities, straight from the CEOs. These are profit-building strategies Main Street isn't meant to hear about -- so you must act now before someone shuts us up. Click if you want "industry insider" earnings -- NOW!


Read/Post Comments (0) | Recommend This Article (3)

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.

Compare Brokers

Fool Disclosure

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: 2757985, ~/Articles/ArticleHandler.aspx, 10/1/2016 8:36:08 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...

Today's Market

updated 11 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

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

9/30/2016 4:00 PM
BIDU $182.07 Down -0.16 -0.09%
Baidu CAPS Rating: *****
QIHU.DL $0.00 Down +0.00 +0.00%
Qihoo 360 Technolo… CAPS Rating: **