Baidu, search engine provider based on a China has very bullish movement after it see the lowest price level at $140 in 2013. Will it continue to grow? Now I think everyone is looking for this information.
Firstly, Baidu is cash-rich company which is my favorite. Their quarterly reports are saying that they have 7,9 billion $ cash & short term investment in June 2014. Which is 2,3 billion $ (500 million $ cash only) more than what they had in June 2013. And their short-term debt is just 7M$, in case of something went wrong they have to just take 7 million $ out of 2 billion $ cash, which makes them financially secure. For long term debt, their debt is 3,3 billion $ which is still not a problem for company.
Despite the fact that, Baidu is spending more and more yearly for development & research, their net income is increasing yearly. While In June 2013 the net income was 430 million $, In June 2014 quarterly reports it is showing as 568 million $ which is %37 increase in one year. Reports are showing us that next 2 years, the revenues will continue increasing and it will affect stock price positively.
Financial- 10/10
| Baidu, Google and Yahoo according the % price change by Yahoo Finance |
Peter Lynch, put Baidu in a category which is `fast-grower` and it is definitely true. In technology sector, you have to find attractive companies and buy them! That's what Baidu did about 91 wireless which is app store. They bought this company for 1,9 billion $ in July 2013. It is very similar what is happening in the market actually, Facebook is buying, Google is buying, Yahoo is.. at least trying to do something...
Growth - 10/10
What is actually at the same time disadvantage and advantage for Baidu is they are based on China. So why it is advantage and disadvantage? Disadvantage is Chinese government is very famous about blocking web-sites and We can not really say that Baidu is as free as Google. They have to always go in a parallel line with the government. Advantage is, it is China! China has billions of internet users and Baidu is the most famous Chinese search engine. It is as simple as it is. Also, as I mentioned in Emerging Economies article, China is the world leader for growing (with %9,7 average rate from 1980) so Baidu is in very suitable place as fast-growing company.
Market Cap-Potential 8/10
Moreover, Baidu has very attractive P/E and PEG ratios according to industry. Current P/E ratio is 38,40 and P/E ratio 2015 and 2016 is 24,79-16,78 respectively which means Baidu will grow more and more. Furthermore, PEG ratio is 1.15 which is fair ratio for Global Internet industry.
P/E - PEG Ratio 8/10
Conclusion
Baidu's future is very bright and they are thinking and acting big. Can they threat Google? Well, not in near future. What is good about Baidu, Baidu is acting like Chinese Google. They are not just a search engine, Baidu has Baidu Map, Baidu Cloud, Baidu News etc etc. I can easily say that, Baidu is a good pick to buy still even though it is in the peak. My final grade is 9/10 to that which is Strong Buy.
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