Momentum In China…Did You Mean Baidu?
Baidu, Inc. (BIDU – Snapshot Report) has been surging for the last month, jumping back to within striking distance of the 52-week high after rebounding from a key trend line. With four consecutive earnings surprise and a bullish growth projection, this stock has ended your search for momentum.
Company Description
Baidu, Inc. operates an Internet search engine out of China. The company was founded in 2000 and has a market cap of $53 billion.
Baidu’s recent upward momentum comes on the heels of the company’s strong first quarter results from late April that came in well ahead of expectations.
First-Quarter Results
Revenue for the period was up 88% from last year to $372 million. Earnings also looked good, coming in at 47 cents, 7% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 9% over the last four quarters.
Online marketing, the company’s largest revenue stream, saw an impressive 88% increase in revenue from last year. Online marketing customers were up 24%, driving a solid 51% increase in online revenue per marketing customer.
Baidu also scored big in managing expenses, where its Traffic Acquisition Cost (TAC) fell to 8.2% of revenue from 13.2% last year.
Financial Profile
Baidu’s incredible earnings growth has enabled it to build a fortress of a balance sheet, with cash and short-term investments of $1.3 billion against a marginal debt load of $41 million.
Estimates
We’ve seen some decent movement in estimates over the last few months, with the current year adding 13 cents to $2.68. The next-year estimate is up 28 cents in the same time to $4.04, a bullish 51% growth projection.
Valuations
Even though the forward P/E looks high, when pricing in growth projections, shares trade with a PEG ratio of 1.07. only slightly higher than the traditional benchmark for value of 1.
12-Month Chart
On the chart, shares are within striking distance of the 52-week high after rebounding from a key trend line in early June. Look for more support from the trend on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.
