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2-Star Stocks Poised to Plunge: Baidu?

By Brian D. Pacampara | More Articles
September 14, 2009 | Comments (1)

Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Chinese search giant Baidu.com (Nasdaq: BIDU  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Baidu's business and see what CAPS investors are saying about the stock right now.

Baidu facts

Headquarters (Founded)

Beijing, China (2000)

Market Cap

$12.81 billion

Industry

Internet software and services

Trailing-12-Month Revenue

$545.9 million

Management

Co-Founder/CEO Yanhong Li
CFO Jennifer Li

Return on Equity (Average, Past 3 Years)

36.9%

Cash/Debt

$491 million / $0

6-Month Return

224%

Competitors

Sohu.com (Nasdaq: SOHU  )
Google (Nasdaq: GOOG  )
Yahoo! (Nasdaq: YHOO  )

CAPS Members Bearish on BIDU Also Bearish on

Amazon (Nasdaq: AMZN  )
Apple (Nasdaq: AAPL  )

CAPS Members Bullish on BIDU Also Bullish on

Research In Motion (Nasdaq: RIMM  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 13% of the 3,635 members who have rated Baidu believe the stock will underperform the S&P 500 going forward. These bears include detoyerofworlds and All-Star BSHumphreyII, who is ranked in the top 10% of our community.

Last month, detoyerofworlds warned Fools about bidding up for Baidu:

Yes China is attractive, but this is bordering on the ridiculous. There is no projection or metric that can make this one look attractive. I don't like either but given the choice between this and Google I'd back the latter, no contest.

In a pitch from two weeks ago, BSHumphreyII also recommends searching someplace else:

A high P/E plus some big volume declines recently strongly suggests that [Baidu's] run is over for the time being. The market looks like it's going to cool down for the fall, and that's especially bad for stocks like this one. This is probably still a decent stock for the long run, but now certainly isn't the time to get in. Take another look in a few months.

What do you think about Baidu, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started!

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Baidu, Sohu, and Google are recommendations of Motley Fool Rule Breakers. Amazon and Apple are Stock Advisor picks. The Fool's disclosure policy always gets a perfect score.


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.

  • Report this Comment On September 14, 2009, at 9:36 PM, ctstone wrote:

    Google's market cap is $150 billion. Baidu's market cap is $13 billion. Potential users of respective search engines in five years is about equal.

    With penetration of less than 25 percent, China already has more internet users than the United States. When most of China's population has broadband and China's Madison Avenue matures, BIDU will warrant a market cap equal to GOOG. That's what's driving the price of Baidu skyward and why -- even at these levels -- many stockholders believe they're holding a 10-bagger.

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