Is Another Shoe Dropping on Baidu.com? (BIDU)

December 10, 2008 by Douglas A. McIntyre

Baidu_logoBaidu.com, Inc. (NASDAQ: BIDU) looks like a stock in trouble.  Again. The Chinese search leader was hitting new 52-week lows before the market recovered late in the day.  The exacerbated move is on the heels of last month’s reporting in China showing that many search results had been manipulated to favor advertisers. 

Shares of the Chinese company are not participating in the broader rally. Some are saying thatvaluations have bottomed.  We aren’t ready to change any tunes beyond a"major bear market rally" yet, but some of the valuations you can findright now are very compelling even if the market does roll back overagain.

Baidu.com has said that the company has rectified its search issues.They are also in China and US investors have no real recourse and arevery short on trust right now.  Losses from the market are one thing.Major losses from company practices damaging the reputation issomething else.

Stocks have now been up 10 of the last 12 trading sessions.  Yetearlier today, Baidu.com was trading on a new 52-week low.  The stockdid not close under the prior 52-week low level of $102.80, but before3:00 PM shares hit an intra-day low of $100.50.

This afternoon the company was one of the runner-up candidates for the"worst chart of the day" award.  The late day rally kept that frombeing the case.  The stock had tried to recover two weeks ago and hadrallied back up to $140+ before this last sell-off.  Now shares areunder the post-trauma lows after the disclosure of its search issues.

With the stock forming a flag down around $100.00, this is indicativetraditionally of another large move coming.  The direction of that moveis still unknown because of the trust issues the company has createdfor itself.

Jon C. Ogg
December 10, 2008