Why Baidu Shares Boomed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese Internet giant Baidu soared 13% this morning after its quarterly results and outlook topped Wall Street expectations.

So what: The stock has slumped in recent years on market share losses to rival Qihoo 360 Technology, but second-quarter revenue growth of 39%, coupled with upbeat guidance for the current quarter, suggests that the tide may be turning. While quarterly profit fell 4.5%, strong momentum in Baidu's mobile segment -- mobile revenue accounted for more than 10% of business for the first time -- indicates that management is at least starting to gain traction in that key space.

Now what: Management now expects third-quarter revenue of $1.42 billion-$1.46 billion this quarter, well ahead of Wall Street's view of $1.35 billion. "We are encouraged to see clear progress in key investment areas," said CFO Jennifer Li in a statement. "We will continue to invest aggressively and remain committed to building long-term value for our shareholders." With the stock still well off its two-year highs (even with today's surge) and trading at a 10-year low P/E, there should plenty of upside left to profit from that bullishness.

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The article Why Baidu Shares Boomed originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Baidu. The Motley Fool owns shares of Baidu. 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 Motley Fool has a disclosure policy.

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