Twitter (TWTR) is one of those companies that often poses a conundrum to investors. On one hand, the...
Update Baidu (BIDU)
02/17/2012 3:36 pm EST
Revenue grew by just 82.6% from the fourth quarter of 2010 as the company saw a 13% increase in its base of active advertisers to 311,000 and a 62% increase in the average ad spend per customer.
The company also managed--deplorably—to keep a tight lid on costs with the costs of acquiring traffic flat with the fourth quarter of 2010. The cost of traffic acquisition remained below historical levels as Baidu’s careful screening of traffic from its partner sites cut down on traffic “waste.” The company did increase spending on research and development for mobile search—mobile searches now account for 15% of all searches on Baidu, the company says—and on its content verticals in online video and online travel services. With investments in bandwidth to support higher traffic, the company actually saw operating margins collapse by 0.6 percentage points to 51.4%.
Okay, let me take my tongue out of my cheek. It was a great quarter and the selling today is really nothing more than profit taking.
There certainly wasn’t anything to get disappointed about in guidance. For the first quarter of 2012, Baidu expects revenue to grow by 75% year over year. That compares to an 88.3% increase in the first quarter of 2011 but the drop is mostly (almost totally?) a result of the shift in the timing of the Lunar New Year. The company’s projections see revenue in the first quarter of $666.5 to $688 million versus the Wall Street consensus of $670.1 million.
That kind of growth makes this a less expensive stock that it seems with shares trading at 28 times forecast 2012 earnings per share.
Once the profit taking is over, I think you can expect Baidu to challenge its 52-week high of $166 by June or July.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did own shares of Baidu as of the end of December. For a full list of the stocks in the fund as of the end of December see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
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