Baidu Showing Signs Of Starting Fresh Upleg
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Baidu shows how an old horse can still play with the ponies.
Well, that's not fair. China's biggest Web search engine came public on the Nasdaq in August 2005. It's less than six years old in the U.S. market. Many of the biggest stock winners put in their best performances in the first 15 years after coming public.
Baidu (BIDU) has been a leader in virtually every market uptrend since 2006.
Baidu's story: China, especially its youth, ardently embraces technology, making Internet search engines and other online tools wildly popular.
China is home to 457 million Internet users, making it the world's biggest online population, according to the Financial Times.
Industry tracker eMarketer predicts that number will rise to 530 million this year, and to 740 million by 2015.
Baidu continues to enjoy a unique sweet spot. It holds a 75% share of China's online ad market.
Is Baidu's story getting old? So you might think.
But in its Q4 report, released late Monday, Baidu earned 52 cents per share, up 174% from its year-earlier result and 7 cents better than expected. Sales doubled, also besting views.
What was behind Baidu's breeze past the Street's estimates?
Bear in mind that Baidu tends to do just that. In the past 12 quarterly reports, Baidu beat estimates nine times, and met them twice. It missed just once, in Q4 of 2008.
Analysts note that Google had rerouted its China Web traffic last year through its Hong Kong servers in an effort to skirt Beijing's censorship efforts. In effect, Google has largely exited the mainland market, although that story may not be over.
In a Feb. 1 research note, Mirae Asset analyst Eric Wen cited Phoenix Nest, Baidu's system that allows advertisers to assemble and monitor an ad campaign.
Phoenix is easy and cheap, and advertisers like it. This helps make Baidu the first destination among online advertisers.
Baidu's Q4 report spurred investors to scramble for shares on Tuesday. The stock gapped up and surged 9%, and has moved sideways since.
Baidu now stands 8% above its 109.35 buy point from a cup-with-handle — a bit extended.
One word of caution: The pattern Baidu broke out from on Tuesday is a fourth-stage base, which research shows are more risky.
Of course, with any stock remember to cut losses short if it starts falling. Sell as soon as the stock is down 7% or 8% from your purchase price. Also remember to watch for any sell signals that appear on the chart.
