Baidu.com Inc. (BIDU:NASDAQ) Internet search dragon from China (Fundamental & Elliott Wave Analysis)
(2 votes, average: 3 out of 5)
Loading ...Baidu.com is the leading Internet search provider in China. Strong fundamentals and outstanding growth can drive BIDU well over today price, but don’t you think that investors already calculated it into stock price?
Company profile
Baidu.com, Inc. is a Chinese language Internet search provider. The Company offers a unique Chinese language search platform for both users and customers. Their platform consists of their websites and Baidu Union, which is their network of third-party websites. Their services are designed to enable Internet search users to find relevant information online, including Chinese language web pages, news, images and multimedia files, through links provided on their websites.
Fundamental analysis
Outstanding growth over past few years made BIDU one of the most successful stocks from China. Booming Chinese economy and millions of internet users is very solid ground for further growth.
Wall Street analysts estimate that 2007 Baidu.com earnings per share (EPS) will be $2.15. It should double it’s revenue this year and in 2008. Longer term (till 2010) earnings growth could be over 50%. While competition is very limited company can beat estimates in longer timeframe.
Return on Equity also displays steady growth and is estimated to rise to 32% in 2007.
While company displays solid earnings and growth prospects I think it is already counted into today’s stock price. The main risk involve possible competitors activity, governmental regulations and increased spending.
Elliott Wave Analysis
Since it’s IPO in 2005 BIDU has made incredible ride uphill. China bubble accelerated major wave 3 and now we have a multi bagger.
Short term:
This stock is real rollercoaster these days. It’s quite hard to calculate possible intermediate wave v top, but it seems that acceleration should continue while China indices advance. BIDU is not an exception and is topping with the load of other popular stocks. Recently stock made new highs, but while it passed few possible major wave 3 milestones I think that BIDU will top at $420 or so.
Medium term:
As already said stock is following China indices and is trying to finish major wave 3.
Long term:
While I think that BIDU will pass over $400 it’s risky deal to buy. Then major wave 4 kicks this stock will be hit hard. I think it could bottom near the top of intermediate wave iii, but if support breaks it will drop till intermediate wave iv near $170. If intermediate wave v will extend we may see higher highs soon.
Conclusion:
Good fundamentals and impulsive waves took BIDU to the top, but massive profit taking could take this stock well below today’s price levels. I’m confident that in near future we will have good bargain offer on this China giant.
Disclosure: Author does not have a position in BIDU.
Tags: BIDU, elliott wave, Fundamental