Google Inc (GOOG): A Must Buy Search Stock

This Quarter

BIDU will announce the results of its last financial quarter, on February 11. It expects revenue of $0.979-$1.01 billion in 4Q2012 i.e. YoY increase of 37.6% to 41.8%. Analysts are expecting revenue to be $998.94 million and EPS to be $1.29. The company has beaten analyst estimates in the last four quarters.

Competition

Qihoo 360 Technology Co Ltd (NYSE:QIHU)’s emergence is currently the largest threat to Baidu. It is the biggest threat in terms of market share erosion. The company is focusing on providing its users new and innovative services. The search market newbie is hiring a lot of ex-Google executives, to wage war on Baidu’s market share.

QIHU has disclosed that it is trying to achieve a market share in the range of 15-20%. We believe it has still a long way to go, to pose a serious threat to Baidu. Some are saying that Qihoo search engine traffic is derivative because it is basically an aggregator of search results. This means that it provides different search engine options to users e.g. users can see Baidu and Google Inc (NASDAQ:GOOG) results on Qihoo website.

Conclusion

The ridiculously high valuations of internet-based companies (e.g. LNKD, AMZN) have made investors wary of another bubble in online stocks. Therefore, 19x Forward P/E valuation of BIDU is very cheap as compared to the industry and poses a lower risk for investors. The company expects growth in the range of 40-50% for the year, which makes it nothing short of a gold mine for investors.

BIDU has the largest market share (approx 80%) in China with Google Inc (NASDAQ:GOOG) and Qihoo way behind. This is a high-growth search market which is currently growing by more than 60% per year. For the time being, Baidu can be regarded as the king of the Chinese search because Qihoo market share is still significantly small, be an immediate threat to Baidu. If investors have a risk appetite for the threats listed below, Baidu is an excellent long term bet.

Threats

An investment in Baidu has the following risks.

  1. The biggest risk is Google’s reentry into the Chinese search engine market. It will have a catastrophic impact on Baidu’s stock price because right now Google Inc (NASDAQ:GOOG) has an extremely big brand name and it will steal away a major portion of Baidu’s Chinese market share.
  2. There have been reports that Chinese companies listed in the United States face the risk of being expelled from US exchanges, due to unsatisfactory implementation of US securities law.
  3. The RPS can slow down in the long run because of increased number of choices available to advertisers. This increase will reduce the pricing power available to Baidu and thus bring down profits.

The article A Must Buy Search Stock originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!