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Yahoo! Inc. (YHOO), MercadoLibre Inc (MELI), Baidu.com, Inc. (ADR) (BIDU): Three Internet Stocks Worth Searching

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As global internet usage grows, boosted by the declining digital divide in emerging markets, it’s an interesting time to look at some established companies in the industry. Solid growth prospects and ever-increasing sources of income make Yahoo! Inc. (NASDAQ:YHOO), MercadoLibre Inc (NASDAQ:MELI), and Baidu.com, Inc. (ADR) (NASDAQ:BIDU) three interesting investment options. Lets take a closer look at them:

It’s all about focus

Yahoo! Inc. (NASDAQ:YHOO) is one of the main providers of web-based services such as email, search, news, and social networking, and is a big player in the online advertising market. Currently, Yahoo.com ranks as the world’s fourth most-visited website, according to Alexa. Trading at $27, or 7.9 times its earnings, a 74% discount to the industry average, is Yahoo! a buy? I’d say so.

With good fourth quarter results, experiencing double-digit increases in EPS, excellent returns, and some solid growth prospects, this is a stock to consider adding to your portfolio.

Yahoo! Inc. (NASDAQ:YHOO)The new CEO, Marissa Mayer, has continued the management’s decision to focus on Yahoo! Inc. (NASDAQ:YHOO)’s core areas and purge non-core businesses and technologies, which has improved the company’s operating margins and maximized profits. 38% of Yahoo!’s revenue stems from display advertising, and as the online advertising market continues to grow at a fast pace (at the expense of traditional media), companies with large audiences (in the case of Yahoo!: 650 million users) are expected to benefit from this tendency.

Furthermore, despite Google (NASDAQ:GOOG)’s strong competition in the search business and its clear advantages, the company has shown signs of improvement, particularly in the mobile segment where it managed to increase its user share to 14.8% of the market.

Not-so-‘Libre’

Mercadolibre Inc (NASDAQ:MELI) is the main online trading platform in Latin America. It’s a kind of south-of-the-border eBay Inc (NASDAQ:EBAY), with whom it has more in common than just a business model. eBay is actually an important MercadoLibre shareholder, while MercadoLibre owns eBay’s former Brazilian subsidiary.

The share valuation does not appear particularly attractive. Trading at $108, or 50 times its earnings, Mercadolibre Inc (NASDAQ:MELI) almost doubles the industry average and exhibits a dividend yield of just 0.5%. Yet, with revenue having quadrupled over the last five years, and promising growth estimates for those to come, investing in the company could sound tempting. Moreover, as the No. 1 online marketplace in the region, the company is extremely well-positioned to profit from the inevitable increase of online commerce in Latin America, a high growth industry that’s still quite infant in the region.

Although Mercadolibre Inc (NASDAQ:MELI)’s growth may look appealing to investors, they should be aware of risks associated with currency volatility, political instabilities, and capital controls present in the region, mainly in Argentina and Venezuela, two markets that the company is particularly dependent upon. After all, contrary to its name, the market where it operates is not that libre (free). In sum, this is a stock more suited to those investors who are not risk-averse.

Fancy some Chinese?

Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is China’s dominant search engine, with over 80% of the market share, and holds second place as the world’s largest search engine after Google. Despite having failed to meet analyst estimates in its latest quarterly report, Baidu continues to offer strong revenue and earnings growth rates that exceed its international competitor.

Trading slightly above the $100 mark ­­­at $105, or 20 times its earnings, and at a 31% discount to the industry average, it appears to be an interesting time to consider buying.

Despite increasing competition from rising Chinese search engines, specially Qihoo, Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s market share remains unrivaled. With an estimate of more than 500 million users, China constitutes the largest internet market in the world and has solid growth prospects. According to its Ministry of Industry and Information Technology (MIIT), its user-base should hit 800 million by 2015.

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