IB Net Payout Yields Model

Buy Baidu At Much Cheaper Prices Now

Based on the post earnings sell-off of Baidu (BIDU), investors now get the opportunity to buy the market leader in the explosive Chinese market at a substantial discount to growth potential. While investors fret over the increased costs and the transition to mobile search, they missed the big picture that mobile will eventually lead to much higher traffic for a country with only 42% Internet penetration.

The company is the leading Chinese language Internet search provider with over 70% market share. As mentioned prior to earnings on February 4th, the company is an extreme value with strong growth potential.

The stock reached close to all-time highs last April around $150 and a market value of $55B. The stock fell off the China cliff until December and has returned back to those levels since the recent sell-off. While investors mull over more competition from Qihoo 360 Technology (QIHU), the real issue remains a market transition outside of the control of the company. The transition to mobile should ultimately expand the search market in China even if it reduces profit margins this year.

Read the full article at Seeking Alpha.

Disclosure: Long BIDU. Please review the disclaimer page for more details. 

Note: Stock was purchased on 2/20 after the article was published. 


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