Will you look at that? We caught ourselves a Charly! Now, before I go on to explain how Charly fell into my trap, let me explain how sharp he is outside of the realm of picking apart Baidu.com
However, in digging up Baidu's past financials and trying to pigeonhole the company into an automated life of consistent earnings growth and a perpetual P/E of 40, he skimps on the history of past search-engine leaders not once -- but twice.
Let's put the numbers together one last time.
| Company | Year | Revenue | Profit (Loss) |
Eventual Market Cap |
|---|---|---|---|---|
| Yahoo! | 1996 | $21.5 | ($6.4) | $46 billion (9 years later) |
| 2000 | $19.1 | ($4.3) | $92 billion (5 years later) | |
| Baidu | TTM | $21.5 | $3.0 | ??? |
In terms of operating efficiency, only Baidu was profitable at this point in its life cycle. In terms of growth, it's hard to deny the potential of China's developing market over our own established market. Look at where Yahoo!
Charly would expect a risky growth stock like Baidu -- and, yes, Baidu is risky -- to reward him substantially. Five years from now, anything less than a $6.2 billion company would be a failure according to Charly's projections. I agree. But he's aiming way too low. Open up the history book, man. Look at the two behemoths that left their footprints behind. Follow the paces. History repeats.
Buy, dude!
Wait! You're not done. This is just a quarter of the Duel! Don't miss the Bull and Bear opening arguments and the Bear rebuttal. Even when you're done, you're still not done. You can vote and let us know who you think won this Duel.
Fool contributor Rick Munarriz believes in investing in China and even recommended another fast-growing Chinese company that has soared by 78% since it was singled out in Motley Fool Rule Breakers nine months ago. You can find out more with arisk-free trial subscription.He does not own shares in any of the companies mentioned in this Duel. The Fool has a disclosure policy.
