BIDU

[David Randolph]

BIDU is an ultra speculative stock, as you probably already know. It will report earnings on Wednesday. After Google's blow out quarter, speculation has started that BIDU may deliver something that can set the stock on fire too.

From their last earnings report (I will copy past it all, since I find it interesting and this is a new company with scarcity of information):

«According to Alexa.com, Baidu.com was the 6th largest website globally for the three months period ended August 23, 2005 and the 4th largest website globally for the one week period ended August 23, 2005, as measured by user traffic that reflects page views and reach during the applicable period.

   Highlights of Second Quarter of 2005

   *  Total revenues increased to RMB69.7 million ($8.4 million),
      representing a 52.6% growth from the previous quarter and a 188.6%
      growth from the corresponding year in 2004.
   *  Net income increased to RMB12.1 million ($1.5 million), representing a
      381.8% growth from the previous quarter and a 625.5% growth from the
      corresponding period in 2004.
   *  The number of active online marketing customers increased to 41,248,
      representing a 29.8% growth from the previous quarter and a 142.6%
      growth from the corresponding period in 2004.
   *  Headcount increased by 103 persons to 750 persons, reflecting continued
      investments in research and development as well as sales and marketing.

"We are very pleased with the results of the second quarter, showing the continued, robust increase in revenues and expansion of our customer base. We are particularly excited that our dedication to enhancing user experience has attracted more and more users to use Baidu for their information needs," said Robin Li, Baidu's Chairman and CEO.

"Our recent successful IPO demonstrated strong investor confidence in the prospects of China's Internet search market, in our business model as well as in our management team. Going forward, we will continue to focus on Chinese language search," Robin Li added.

"China's online marketing sector, and the search-based pay-for-performance model in particular, is still at an early stage of development but is evolving rapidly. Baidu will continue to make focused investments in our products, technology and marketing in order to maintain our leadership position in this rapidly developing market and to provide the best search experience to Chinese Internet users," said Shawn Wang, Baidu's CFO.

Unaudited Financial Results for Second Quarter of 2005

Total net revenues for the second quarter of 2005 were RMB65.2 million ($7.9 million), representing a 52.9% increase from the previous quarter and a 185.5% increase from the corresponding period in 2004.

Online marketing revenues for the second quarter of 2005 were RMB66.7 million ($8.1 million), representing a 55.1% increase from the previous quarter and a 211.9% increase from the corresponding period in 2004. The significant growth in the quarterly online marketing revenues was primarily attributable to the catch-up effect of the post-Chinese New Year holiday period, as well as Baidu's expanded marketing efforts which led to the increases in the number of active online marketing customers and revenue per online marketing customer. As highlighted above, the number of active online marketing customers increased to 41,248, representing a 29.8% growth from the previous quarter and a 142.6% growth from the corresponding period in 2004. Average revenue per online marketing customer increased to RMB1,613.9 ($195), representing an 18.9% growth from the previous quarter and a 28.3% growth from the corresponding period in 2004.

Traffic acquisition cost was RMB4.3 million ($0.5 million), decreasing to 6.1% of total revenues from 11.4% in the corresponding period in 2004.

Selling and marketing expenses, as components of operating expenses, were RMB16.0 million ($1.9 million), representing an increase of 90.5% from the previous quarter and 225.3% from the corresponding quarter in 2004. The increases were primarily attributable to the increase in sales and marketing personnel and expanded marketing efforts.

Operating profit on a GAAP basis was RMB11.9 million ($1.4 million), representing a 336.8% increase from the previous quarter and 687.6% from the corresponding period in 2004. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB18.1 million ($2.2 million) for the second quarter of 2005, representing a 104.2% increase from the previous quarter and a 224.6% increase from the corresponding period in 2004.

Net income on a GAAP basis was RMB12.1 million ($1.5 million), representing a 381.8% increase from the previous quarter and a 625.5% increase from the corresponding period in 2004. Net income excluding share-based compensation expenses (non-GAAP) was RMB18.2 million ($2.2 million) for the second quarter of 2005, a 110.8% increase from the previous quarter and a 218.0% increase from the corresponding period in 2004. Basic and diluted earnings per ADS for the second quarter of 2005 amounted to RMB0.99 ($0.12) and RMB0.39 ($0.05), respectively.

Adjusted EBITDA (non-GAAP), defined here as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, was RMB24.8 million ($3.0 million) for the second quarter for 2005, representing a 75.7% increase from the previous quarter and a 235.1% increase from the corresponding period in 2004.

Capital expenditures (including acquisitions) totaled RMB15.6 million ($1.9 million) for the second quarter of 2005, representing a 200.4% increase from the corresponding period in 2004, as a result of our expanded expenditures on operational activities.

Cash and cash equivalents, as of June 30, 2005, amounted to RMB210.7 million ($25.5 million), up from RMB200.2 million ($24.2 million) as of March 31, 2005. Operating cash flow was RMB32.0 million ($3.9 million) for the second quarter of 2005, as compared to RMB14.8 million ($1.8 million) for the previous quarter and RMB13.0 million ($1.6 million) for the corresponding period in 2004.

Outlook for Third Quarter 2005(2)

Baidu currently expects to generate total revenues in an amount ranging from RMB77.4 million ($9.6 million) to RMB81.2 million ($10.0 million) for the third quarter of 2005, representing a 139-151% growth from the corresponding period in 2004. This forecast reflects only the company's current and preliminary view, which is subject to change.

Conference Call Information

In light of the recent IPO, Baidu will not host a conference call for this announcement. However, Baidu intends to conduct conference calls for future earnings releases. This release is also available at http://www.baidu.com.

About Baidu

Baidu.com, Inc. is the leading Chinese language Internet search provider. As a technology-based media company, Baidu aims to provide the best way for people to find information. In addition to serving individual Internet search users, Baidu provides an effective platform for businesses to reach potential customers. Baidu's ADSs, each of which represents one Class A ordinary share, are currently trading on the NASDAQ National Market under the symbol "BIDU".»

I almost can't believe my eyes. I read $1.5M in net income for the second quarter only, and the company's market cap is $351.90M. Assuming no growth (and that's a bit stupid, but anyway), BIDU would have a net income of $6M in one year, so the current P/E Ratio is 58.65.

But earnings grew 381.8% quarter on quarter and 625.5% year on year.

BIDU's current market cap is $351.9M, Google's is $103.75B  

The company's forecast for the third quarter is this:

«Outlook for Third Quarter 2005(2)

Baidu currently expects to generate total revenues in an amount ranging from RMB77.4 million ($9.6 million) to RMB81.2 million ($10.0 million) for the third quarter of 2005, representing a 139-151% growth from the corresponding period in 2004. This forecast reflects only the company's current and preliminary view, which is subject to change.»

Revenues grew 52.9% from the first to the second quarter. If the growth rate continues, revenues for the 3rd quarter will be $12.08M, and the company's guidance is $9.6 to $10M.

I think they're being conservative here, to make a positive surprise on their 3rd quarter earnings release and conference call.

So I'll buy BIDU at tomorrow's open for the 3 Stocks on Fire Portfolio, and this way I'll be 100% invested, coming from 93% cash just a few days ago  

[puenthouse]

Ha ha   i was shorting this beast!!!  got out after seeing the volume and price rise. got stung a little.   This stock jumps 10.00 like it is nothing.  3 weeks ago, there was no good news coming out of this company and talks of china banning it???  GL

[valueseeker]

HI David,

I think BIDU's market caps is $2.6B as stated on Yahoo.


-Valueseeker

[Ramsburg]

Bought BIDU @ $84.44 for the 3Stocks Portfolio

[David Randolph]

HI David,

I think BIDU's market caps is $2.6B as stated on Yahoo.

-Valueseeker

Damn it, on marketwatch.com says $346.77M, look here: BIDU at marketwatch.com 

On the Yahoo Finance website it says the market cap is $2.58B

After looking at the company's IPO prospect I find that Yahoo is right, Market Watch is wrong. That's it, I will never use Market Watch again !!!

Thanks a lot for the info valueseeker (I'll applaud you ), it was a pity I didn't saw it earlier.

It looks like Cramer was a basher on BIDU yesterday too, and no wonder, after all the stock is not cheap at all as I thought (because the market cap was erroneously stated on Market Watch).

Results are coming out after the close today, and I bet they will beat expectations, but even so the stock will be too expensive anyway, I believe. My motives to buy are no longer valid, this was a mistake, the lesson taken is to never use Market Watch as a source of information again.

I made a mistake, I must admit that mistake and sell the stock at today's open.

[Lucas Scott]

Good thing you sold. (_BIDU_) fell hard in AH after the earnings release. The stock is on fire in a bad way.

[robt]

In defense of MarketWatch, it seems they are excluding the "locked up" shares that aren't permitted on the market for now -- 4m vs. 32m shares.

Hard to say which approach is more accurate, in that the scarcity of shares has supported these extreme valuations.