24/7 Wall St.

Baidu.com (NASDAQ:BIDU) is not following Microsoft or Google shares up in the post-earnings cycle.  Its $24.2 million in net income translated to $0.70 EPS and its Revenues came in at $66.3 million.  Estimates were $0.63 EPS and $65.5 million plus on revenues.

GUIDANCE: Baidu currently expects to generate total revenues in an amount ranging from $74.7 million to $76.7 million for the fourth quarter of 2007.  That represents a 106% to 112% increase from the corresponding period in 2006 and a 13% to 16% increase from the third quarter of 2007.  First call had Next quarter estimates are $0.70 EPS on $75.7 million revenues. 

This was a beat on this quarter earnings but it is just an in-line revenue guidance, and that should NOT justify the high valuations and unbelievable performance.  24/7 Wall St. recently gave some "lessons of the bubble" on its lofty valuations.  Of course, we’ve warned that logic hasn’t been applicable to this stock.  Shares closed down 0.5% at $334.30 in normal trading, but shares are down 4% at $321.00 in after-hours trading. 

Unless the Baidudians are holding back some incredible good news, this could give back even much more of those recent gains.  Its valuation is nearly 30-times 2008 revenues and forward earnings 2007 ($2.22) and 2008 ($3.80) targets on EPS before earnings were released gave the Chinese internet beast forward P/E’s of 155 and 90 respectively.  Its last short interest reading was listed as 2.829 million shares, down from 3.03 million shares short at the end of September.  There is no doubt at all that there is a significant value to Baidu.com even if the guidance is only in-line.  We just question the current valuations based upon the monster 75% stock surge seen since August and 200% gains this year.

• Cramer called this one a "Cheap Expensive Stock"
• It ran 8 days in a row, and continued on up….

Jon C. Ogg
October 25, 2007

Jon Ogg is the editor of the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.  Free email sign-ups can be accessed here.