There's plenty riding on Baidu's (Nasdaq: BIDU) quarterly report on Thursday.
As far as Chinese growth stocks go, it's the closest that investors can get to a true market darling. Shares of Baidu rose 21% last year, even though investors generally soured on stocks from the world's most populous nation last year.
This year may be even more scintillating. The stock is already up 20% through the first six weeks of 2012. A strong report -- or a weak one -- will get Baidu moving later this week.
Volatility is certainly part of the game here. Baidu didn't coast to a smooth 21% through 2011. The stock began the year in the double digits, soaring to an all-time high of $165.96 in the summer. The stock closed at $116.47. The market will look back at last year as a market-thumping performance for Baidu, but shareholders that got in when the dot-com fave was peaking in July are smarting even now.
When Baidu reports on Thursday night -- and it will be Thursday night, as Baidu's call is slated to begin at 8pm to coincide with Friday morning in China -- investors will be looking for the signs that tripped up the Internet companies that reported mixed results earlier this earnings season.
Will guidance hold up? Chinese online portal Sohu.com (Nasdaq: SOHU) took a hit after following up solid results with a disappointing near-term outlook last week.
Are advertisers still paying as much? Global search leader Google (Nasdaq: GOOG) took its lumps when it reported that advertisers were paying an average of 8% less per click during the same three months.
Baidu shares were pressured on both reports, though it's not entirely fair. Sohu's Sogou is a fast-growing search engine in China, but paid search remains a small piece of Sohu's business. Google remains China's second most popular, but there's no way that its global performance can be used as a measuring stick for China.
Baidu is the only paid search provider in China worth watching. Market researcher Analysys International sees Baidu's share of the market clocking in at a healthy 78.3% chunk in the fourth quarter.
The stock isn't cheap on its own. Baidu is trading at 31 times this year's projected profitability and 22 times next year's bottom-line target. Have you seen its growth, though? Analysts see Baidu growing earnings and revenue at 54% and 56% clips, respectively, through 2012.
Yandex (Nasdaq: YNDX) is cheaper. Russia's leading search engine can be had for just 27 times this year's earnings and 18 times next year's mark, but Baidu's larger footprint and global intentions make it the niche's darling.
So don't go to sleep early on Thursday. Baidu's stock is going to move one way or the other on Friday, and you may as well find out why as early as possible.
Bullish on Baidu
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