Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is, Inc. (ADR) (BIDU) a Buy at These Levels?, Inc. (ADR) (NASDAQ:BIDU) has made a recent comeback with a strong market rally. Its share price increased from more than $89 per share in the beginning of July to nearly $127.60 per share, marking an incredible gain of more than 43% within just one month. Moreover, Morgan Stanley upgraded the stock from Equal Weight to Overweight. Should we listen to Morgan Stanley’s upgrade? Is, Inc. (ADR) (NASDAQ:BIDU) a good buy now? Let’s dig deeper.

Second-quarter operating results, Inc. (ADR) (NASDAQ:BIDU)In the second quarter of 2013,, Inc. (ADR) (NASDAQ:BIDU) experienced extremely high growth of 38.6% in revenue to RMB 7.6 billion ($1.2 billion). Its operating profit rose by 3.2% to RMB 2.9 billion ($473.1 million). However, its net income dropped by 4.5% to around RMB 2.6 billion ($430.8 million). The declining net income was due to the higher cost of revenue, higher SG&A and R&D expenses.

What investors might focus on in, Inc. (ADR) (NASDAQ:BIDU)’s operating results is its growth in mobile monetization. The company reported it had around 58,000 online active customers, and for the first time, its mobile revenue accounted for more than 10% of the total revenue.

Looking forward to the third quarter 2013,, Inc. (ADR) (NASDAQ:BIDU)’s revenue is expected to be in the range of $1.4 billion to $1.5 billion, representing huge growth at 39.7% to 43.3% compared to the third quarter last year. Morgan Stanley estimates that, Inc. (ADR) (NASDAQ:BIDU)’s operating margin will remain under pressure because of higher marketing spending. However, Morgan Stanley believes that Baidu will “enjoy operating leverage in 2014, with sales re-acceleration.”

Still the leader in the Chinese search market

Baidu has been the main beneficiary of Chinese Internet regulation, which keeps Google Inc (NASDAQ:GOOG) from operating in the country, the largest market in the world. Baidu is the leader in the Chinese search market, with the dominating 67.5% market share. Google Inc (NASDAQ:GOOG) stays in the third place with only 3.3% market share.

Actually the market shares of both Baidu and Google has dropped in the past year, due to the rise of Qihoo 360 Technology Co Ltd (NYSE:QIHU), which quickly gained nearly 15.2% of the Chinese search market share within just several months.

The quick market-share gain was due to the fact that Qihoo 360 Technology Co Ltd (NYSE:QIHU)’s web portal and browser switched its default search engine from both Google and Baidu to its own search services, seizing many accidental users overnight. However, as there is not much Baidu traffic coming from Qihoo, and Baidu’s market share is still much larger than Qihoo, there is still a lot of potential future growth for Baidu.

Go mobile

Google is the wonderful business model for Chinese Internet companies. It is not only the leader in the search market, but also the leader in mobile, with its Android operating system. Google Android currently has around 75% of the total smartphone market and more than 56% of the tablet market globally. Google Android is also the leader in China, accounting for 90% of all mobile operating systems. However, Google Play is not available in China.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.