Baidu Stock Has a July to Remember

Baidu (BIDU +11.62%) has finally come around.

The discarded dot-com darling that failed to initially join the rally of search and Chinese growth stocks has bounced back in a major way. China's leading search engine has seen its shares climb 56% since bottoming out in April.

Baidu stock is up nearly 35% this month alone, and after falling out of favor with investors, Baidu is back to within 4% of setting a new 52-week high as of Monday's close.

It certainly didn't seem as if July would be all that spectacular for Baidu, especially when it began with an analyst reporting that pesky rival Qihoo 360 had climbed to claim a nearly 15% share of the Chinese search market.

Things got better after that.

Baidu made up for its shortcomings in mobile search by announcing a planned $1.9 billion buyout of China's leading mobile apps marketplace operator. It then followed up last week with a better-than-expected second quarter.

It's not just the welcome string of good news. Analysts are also starting to nudge their projections higher after guiding them lower in the weeks after its poorly received first-quarter report. Let's see how Wall Street's profit targets for Baidu have fluctuated during the past three months.

Source: Yahoo! Finance.

The estimates naturally haven't been climbing at the same pace as the shares, but it certainly helps in making a valuation argument that's still compelling. Baidu is fetching a reasonable 20 times next year's earnings, cheaper than Russia's Yandex (YNDX +10.78%) at 23 times next year's projected profitability.

Both companies are growing at healthy clips, justifying the market premiums. Yandex also posted better-than-expected quarterly results last week, climbing higher after also issuing encouraging guidance. However, Baidu is growing faster despite the cheaper forward earnings multiple.

It's been a good July for Baidu stock. Now let's see what August brings.