Feb. 10, 2010 (Chinavestor) Shares of Baidu.com (NASDAQ:BIDU) soared late Tuesday and pre-market trading on Wednesday following better-then-expected results from China's largest search engine company. Baidu.com (NASDAQ:BIDU) reported total revenues of RMB 1,261 million ($184.7 million) for the last quarter, representing in increase of 39.9% year-over-year (YoY). The company increased 2010 first quarter revenue guidance to RMB 1,200 million ($176 million) to RMB 1,235 million ($181 million) vs. analysts' expectations of RMB 1,160 million ($170 million).
Despite a good reading for the first sight, we issue a warning that short term correction is possible. Here is why.
While revenues and earnings continued to grew substantially in 2009, quarter-over-quarter (QoQ) readings don't justify a 10% jump in price. Ctrip.com (NASDAQ:CTRP) reported similar results to Baidu.com (NASDAQ:BIDU) - strong YoY growth but a setback in the fourth quarter - yet the stock got punished. Related story: Ctrip '09 Q4 disappoints: How bad is it? Or take a look at Sohu.com (NASDAQ:SOHU), a company that reported good YoY growth yet got hammered in after market trading. Sohu '09 Q4 numbers from a distance.
This article is not to say that Baidu.com (NASDAQ:BIDU) is not a quality company. Far from it. Actually, we have Baidu.com (NASDAQ:BIDU) in the Growth Portfolio as we speak. But a $43 or 10% jump in pre-market trading overdone in my opinion and as a result, I wouldn't buy BIDU at $475. I'll buy it in a dip instead. If not today, may be tomorrow...
If you like us, spread the word to the fellow investors on your favorite Social Bookmarking websites
