24/7 Wall St.

Bloomberg wrote, just before Baidu’s (BIDU) earnings, that the internet and investing worlds had lined up against the company. Short interest in the stock was up, and Google (GOOG) was making in-roads in China.

The news agency found a number of Baidu pessimists: “Baidu’s stock price is justified if the gap between it and Google is widening, but in reality that gap is narrowing,” said Wallace Cheung, a Hong Kong analyst at Credit Suisse Group  And, "Google, which spent $408 million in the first quarter to develop Web services versus Baidu’s $3.2 million, is also winning users with online programs such as maps and spreadsheets."

Well, none of that mattered. Baidu’s stock jumped 18.4% to $217.03 after it announced earnings. The company posted second-quarter net earnings of $18.6 million, or  $.54 per share. Revenue at the Beijing-based company climbed $52.7 million. Wall Street was looking for a per-share profit of $.43 on revenue of $49 million.

So much for the unbelievers.

But, after yesterday’s run-up, Baidu has a market cap of $7.4 billion. That is for a company that may do $250 million in revenue this year. It may have 58% of the Chinese search market, but selling ads with search results is still unproven in that country’s as Baidu’s modest revenue attests.

Baidu’s revenue improvements are spectacular, but, as they say on Wall St., they are off a small base.

In the US, Baidu would probably need to have revenue of $500 million to $1 billion to justify its market cap.

But, Baidu is not based here.

Douglas A. McIntyre