2-Star Stocks Poised to Plunge: Baidu?
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Chinese search giant Baidu.com (NAS: BIDU) has received a distressing two-star ranking.
With that in mind, let's take a closer look at Baidu's business and see what CAPS investors are saying about the stock right now.
|Headquarters (Founded)||Beijing (2000)|
|Market Cap||$49.1 billion|
|Industry||Internet information providers|
|Trailing-12-Month Revenue||$1.97 billion|
|Management||Co-Founder/Chairman/CEO Yanhong Li CFO Jennifer Li|
|Return on Equity (Average, Past 3 Years)||46.7%|
|Cash/Debt||$1.8 billion / $390.3 million|
|Competitors||Google (NAS: GOOG) |
NetEase.com (NAS: NTES)
Sohu.com (NAS: SOHU)
Sources: S&P Capital IQ and Motley Fool CAPS.
Just last week, eksummers620 listed a few of Baidu's seemingly unsustainable price multiples: "[V]alued at 29 times forward earnings, 61 times cash flow, and a laughable 22 times book value."
In fact, Baidu's forward P/E of around 31 represents a clear premium to rivals like Google (14), NetEase (11), and Sohu (10).
CAPS member akai0131 elaborates on the Baidu bear case:
Will underperform because it only shows strong potential in China.
Baidu will find it hard to compete with Google across the globe and I doubt anyone non-chinese will use Baidu ... unless they also offer a very good english service...
But then considering China's problems with patents and such, and also with vast accusations of Internet hacking I doubt that Baidu will be favorably looked upon by international users.
Unless China opens up or Baidu can show integrity independent of China's political will, Baidu will have a short-lived success.
I would rather expect a google-copy-cat merging from India or Brazil to have a real good chance of competing with Google properly. But China? Considering how fragmented Chinese society is, and the difficulty of learning and using the Chinese language, Baidu will remain a Chinese artifact.
What do you think about Baidu, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Baidu, Google, NetEase, and Sohu. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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