I don't see anything suggesting these outfits may have somehow, somewhere taken a short position. Hmmmm, I wonder....nah, they would never do that.
Baidu.com slammed on valuation
Goldman Sachs, Piper Jaffray say shares are too pricey
By Mark Cotton, MarketWatch
Last Update: 8:49 AM ET Sept. 14, 2005
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NEW YORK (MarketWatch) -- Shares of Baidu.com Inc. tumbled nearly 20% in the pre-market Wednesday as concern about the Chinese Internet search engine's soaring valuation prompted analysts at Goldman Sachs and Piper Jaffray to start coverage with underperform ratings.
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U.S.-listed shares of Baidu.com (BIDU: news, chart, profile) were last down $22.23, or 19.6%, at $91.36 in pre-market trading on Instinet.
Both brokers said their ratings did not in any way reflect on the successful business model of the company, which has allowed Baidu.com to become the leading Internet search engine in China.
"But Baidu's current stock price has far exceeded even the most aggressive valuations and is distinctly 'off the chart' in our view," said Safa Rashtchy, analyst at Piper Jaffray.
Rashtchy set a $45 price target on the stock -- a mark, the analyst says, that includes an aggressive valuation premium.
Over at Goldman Sachs, analyst Anthony Noto values the stock at around $27, with the broker's most optimistic assessment offering up an implied value for the company of about $45, some 60% below current levels.
Nevertheless both analysts remain upbeat about the company's prospects.
Noto's forecasting growth rates of 35% for revenue and 40% for earnings per share between 2006 and 2009. In 2006 alone, the Goldman Sachs analyst estimates Baidu.com will see earnings-per-share growth of 106% on a 71% jump in revenue.
Noto bases his forecast on the company's solid results to date and on an exploding Chinese market.
"By 2008, the number of Internet users in China should reach 252 million, surpassing that of the U.S. despite only representing 19% of the expected population at that time vs. 71% for the U.S," said Noto. "These strong secular growth trends provide a positive backdrop for Baidu."
For Rashtchy, Baidu.com will benefit from a rapidly growing sponsored-search market in China.
The Piper Jaffray analyst said sponsored search currently represents a market of around $134 million but should approach $1 billion by 2010, driven by increasing query volume and higher advertiser participation and spending levels.
"Search queries are growing at a very rapid rate, expected to double in 2005 and continue to grow fast, as increasing relevancy and higher user familiarity with search engines creates more usage," asid Rashtchy.
At the same time, said the analyst, the low cost of sponsored search and its effectiveness are attracting an increasing number of advertisers and allowing for "click charges" to go up.
Disclosing its interest in Baidu.com, Piper Jaffray has received compensation for investment banking services from the company in the past 12 months. It was also making a market in the company's securities at the time its research report was published.
Goldman Sachs has managed or co-managed a public offering Baidu.com in the past 12 months and a makes a market in the company's securities. |
