3 Reasons to Buy Baidu.com, Inc. (BIDU) Under $100

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Baidu.com, Inc. (NASDAQ:BIDU) is back in double digits, but it may not last long.

Baidu closed below $100 for the first time since late last year on Tuesday, after posting poorly received quarterly results. Squeezed margins and guidance calling for a sequential top-line decline in the current quarter will do that to a stock.

Baidu isn't perfect, obviously. However, the stock may prove to be too big of a bargain for growth investors to pass up at this point. Let's go over a few reasons why Baidu is probably cheaper than you think.

Baidu (BIDU)

1. Baidu is still growing Yes, growth has decelerated at China's leading search engine. The years where revenue was roughly doubling a year are gone forever. There's still growth to be had here. Don't be fooled by the sequential weakness.

In the fourth quarter -- the first time that Qihoo 360 Technology Co Ltd (NYSE:QIHU)'s rival search engine was available for the entire period -- revenue still climbed 42%, for Baidu's first $1 billion quarter.

Baidu's guidance for the current quarter may represent a 4% to 7% sequential decline, but there are seasonal factors at play here. Sohu.com Inc. (NASDAQ:SOHU) actually braced investors to expect a 12% to 17% sequential decline in revenue at its Sogou search engine this quarter.

The end result is still impressive on a year-over-year basis. Generating $945.4 million to $975.9 million in revenue this quarter would represent 38% to 43% in growth.

That's not too shabby.

2. Baidu is cheaper than you think on an earnings basis Broadening its video platform, and exploring new growth opportunities, means straying from the chunky margins of paid search. It also requires investments in the near term that will hopefully pay off in the long run.

It's not fun to see a company grow its revenue by 42% in its latest quarter, only to see grabbing hands milk the income statement to the point where operating income only inched higher by 24%.

Analysts are left with little choice but to scale back their profit targets. Three months ago, analysts figured that Baidu would earn $6.03 a share this year, and $7.56 a share come 2014. Now, the pros are perched at an average of $5.61 a share this year, and $7 a share next year. It's often dangerous to buy into companies at a time when estimates are trending lower, but Baidu's growing too quickly to dismiss at less than 18 times this year's projected earnings, and just 14 times next year's bottom-line forecast.

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