Baidu Going to $260?
by: Michael Bryant February 15, 2011 | about: BIDU
Baidu (BIDU) is a Chinese search monopoly garnering over 70% of the Chinese search market. And with Google (GOOG) forced out of the Chinese market do to regulation violations, this leaves clear sailing for BIDU.
I agree that at first glance the stock looks pricy.
BIDU’s PE is 4 times that of Google. Forward PE is 2 times that of Google. However, PEG is about the same as that of Google. Quarter over quarter sales growth is about 4 times that of Google. And return on equity is over twice that of Google. So the pricey share price is compensated by the high growth of BIDU.
Since Google is gone from competing with BIDU in China, it seems logical that BIDU will achieve the same or similar market share in China. This leaves another 10% or so of market share growth for BIDU.
And remember, China has about 1/5th of the world population. If China becomes like the US or Japan 50 years from now, which I think it very possible, that leaves a lot more potential growth for BIDU.
Number of Internet Users
According to the chart above, the percentage of the Chinese population using the internet is still less than half that of the US and Japan. That means BIDU can at least double in share price from its current price of $128.
The graph below shows BIDU could head higher very quickly.
For each graph, top black line is overbought and bottom black line is oversold.
The stock seems to defy all technical indicators, let alone gravity. The MFI, RSI, W%R, and %K and %D are useless in predicting sell signals throughout the last year. As the first purple line illustrates, the stock did not fall when then indicators became overbought. As the second purple line indicates, it fell slightly when the indicators WERE NOT in overbought territory.
Thus, I would dismiss those technicals for now and concentrate on the support and resistance lines. The price is near support and will likely either follow the support line higher of move higher to the resistance line. Either way, it is going higher.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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