Baidu.com Up Eight Straight Days, Can It Continue? (BIDU, SINA, SOHU, NTES)

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Baidu.com, Inc. (NASDAQ:BIDU) is one of these stocks that is pretty amazing when you look at its trading activity and its volume.  BIDU stock closed up Wednesday another 2.6% at $275.95 on 11.8 million shares, which is another yearly high and more than double average daily volume.  This wouldn’t be a big day on a percentage stock move basis alone unless you look at how it has been trading of late. 

This stock has managed to close up for Eight consecutive days from its last down day on September 2, 2007 when shares closed at $213.64.  Here are the descending closing prices from before Wednesday: $268.79; $252.89; $234.88; $232.47; $230.12; $227.04; $218.10; $213.64. But compare that to dates below and this one looks amazing.  If you compare this to lows in the past months it becomes "exuberant":

  • Lowest close August: $168.89 on August 16, 2007
  • Lowest close July:       $175.04 on July 24, 2007
  • Lowest close June:      $135.64 on June 12, 2007
  • Lowest close May:        $121.35 on May 1, 2007
  • Lowest close April:       $93.523 on April 2, 2007
  • Lowest close 52-Week: $87.28 October 2006

Obviously this one has everything going for it.  It is a hot stock for sure, but it is a hot web search engine stock in the even hotter Chinese market.  The overly obvious is that one incredible quarter is being priced in.  Should we dare we mention the hype from the coming 2008 Olympics?  But what else could be coming besides that?  Obviously a stock splitcomes to mind, but what else?

It’s impossible to know what the shortinterest is in BIDU now in September, but the August short interest wasonly listed as 2.799 million shares.  Its market cap is nearly $9.4Billion.  If you trust Alexa rankings(not perfect at all, certainly on foreign sites) on mostly a pureChinese play, the numbers are actually looking lower in the grandscheme of things, but the compete.com rankings still show it growing.

Withconsensus earnings for 2007 at $2.20 EPS and 2008 at $3.67, this tradeswith forward price/earning ratios of 125.4 for 2007 and 75.2 for 2008.Based upon revenue expectations for 2007 of almost $223 million and2008 of $394 million, the projected price/revenues multiples aremassive at 42.1-times 2007 revenues and 23.9-times 2008 revenues.  Ifthe company blows out the next quarter then those extremely highmultiples will just look very high.

Some analyst targets wererecently raised as RBC Capital now has a $333 target on its outperformrating and Piper Jaffray has a $252 target on its Outperform rating.

Arethe comparables in China up the same 200+% like BIDU?  Shares ofSohu.com Inc. (NASDAQ:SOHU) with its $1.45 Billion market cap are upalmost 100% from its lows of the year, shares of Sina Corp.(NASDAQ:SINA) with its $2.6 Billion market cap are also up almost 100%from 52-week lows, and lastly Netease.com Inc. (NASDAQ:NTES) shareswith its $2.2 Billion market cap are up "only" 23% from 52-week lows.These other large Chinese web and Internet stocks are outperforming themarket, but lagging far behind the meteoric rise seen in BIDU shares.

Withoptions expiring Friday, this is going to be one to watch.  There wereover 12,000 contracts of the SEPT $280 Calls that traded alone,although there were over 9,700 contracts of the SEPT $270 PUTS thatchanged hands.  October options contract trading is far lighter, butwith a $20.10 last print on the OCT $280 Calls it isn’t too hard tofigure out why.

Can an eight day run turn into nine, ten, orfifteen? Yes of course.  But when you see moves like this in apost-Dot.Com and year 2000 stock trading frenzy, it’s hard not toscratch your head.  Regardless of if the trend continues or reverses,Thursday and Friday should be exciting days for Baidudians. 

Jon C. Ogg
September 19, 2007