This Just In: Upgrade on Baidu

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
What do you do when one of the smartest bankers on the planet rips a page from the headlines, and turns it into an upgrade for one of the hottest stocks in China? Me, I read that upgrade intently, and the way I see it, Credit Suisse is right on the money when it tells you Baidu (NASDAQ:BIDU) is no longer a "sell" -- in fact, I think that may be understating the case.

After laying out the multiple endgames to Google's (NASDAQ:GOOG) landmark China ultimatum, Credit Suisse concludes the most likely result is that Google will not in fact, pull out of China. However, in staying in-country, Google will face a more "challenging" business outlook and struggle to maintain market share as advertisers turn to companies with less contentious government relations.

Meaning Baidu.

Let's go to the tape
Is Credit Suisse reading the Chinese tea leaves correctly? Is Baidu the ultimate beneficiary of Google's "Don't be evil in China" stand? As a matter of fact, I believe it is. And if the disclaimers are wrong, and "past performance" is any indication at all of future success, you should believe Credit Suisse, too:

As you can see, Credit Suisse boasts a strong record of making accurate picks in the Internet Software and Services sector generally, and regarding China in particular. So when CS tells us that Google's China stand could cost it as much as one-third of its Middle Kingdom market share, well, that's cause for worry.

Everything's connected
The more so in light of this week's other China spat. As you may have heard, on Friday the Obama administration floated plans to sell as much as $6.4 billion in military hardware to Taiwan. U.S. defense contractors are dancing in the streets this week, but China is, shall we say, less than thrilled with the prospect of seeing dozens of Lockheed Martin (NYSE:LMT) fighter jets and dozens more United Technologies (NYSE:UTX) attack helicopters taking a fast boat to its recalcitrant island "province." In addition to curtailing military exchanges, the government is threatening to retaliate against certain U.S. companies operating in China.

And Google's already in the crosshairs.

Foolish takeaway
What's it all mean to investors? According to Susquehanna Financial, this is big enough news to drive Baidu stock all the way to $520. Credit Suisse isn't as optimistic as all that, settling rather on upgrading the shares only to neutral.

But one thing's clear: If you're selling Baidu today, you're swimming against the tide.