I think everyone is forgetting something here. I mean, I've been watching Baidu forever now, and this is crazy. I'm just waiting for them to head up over the $100 mark, and going to short short short!
Don't Get Lost In The HYPE!
There are generic, non-stock related risks Baidu still faces, and I think investors are completely forgetting to take into consideration on their prices. This risk is CRUCIAL to their price! Think about it, Baidu is Chinese, and they are subject to China's economic, political and legal policies, something still very risky. Any day, the Chinese government could ban them like they do to many US websites. What then?
Ok, their last quarter was excellent, and quite frankly, I'm going bullish on this quarter too. Let's do a bit of refreshing, Baidu's most recent earnings projected sales will grow by 177.5% for 2006 and by 64.2% for 2007, and earnings at about $0.91 for 2006 and $1.40 for 2007.
More analytical now, their shares are trading at 22x book value, almost 60x their trailing sales and 140x their 2006 earnings estimates. Doesn't that seem a little pricey for you? Trust me, any negative news, even the slightest hiccup will send their stocks tumbling.
When valuing Baidu, I use the metrics and parameters I would use for Chinese stocks, not those I would use for like Google or Yahoo!. And being even the most optimistic, even at the most impossible (for example a 200% growth rate for the next five years), I still do not get a discounted value in the high-$70s, not to mention that they are still being traded at over $90 now.
I am seriously waiting for them to head up over to $100, and then like I said before, short short short! I still have them shorted, so I am losing a bit, but I will bring up the average cost soon, you can trust me on that one.