Boston, MA 10/31/2013 (wallstreetpr) – Baidu Inc (ADR) (NASDAQ:BIDU) has once again proved the skeptics wrong and has come out with a stellar consensus beating result. And with this result, concerns raised because of new and upcoming search engine Qihoo have been put to rest for a while. Though it is true that the new company is scratching away some of Baidu’s market share, it may be too early to raise red flags for the Chinese search giant.
The company has informed the exchanges that its revenues have risen a stupendous 42% to reach RMB 8.9 Billion. And this is above analyst expectations’ of RMB 8.8 Billion. But same growth rate is not being seen on earnings front for the simple reason as Baidu is going aggressive on its investment front and is investing heavily for future. The earnings rose a mere 1.3% for the year and still beat market expectations. Though it’s a surprise that with such low growth rate it was able to beat expectations, the fact remains that Baidu had actually failed to meet net income expectations for 2 of the last four quarters. In a bid to secure its future turf, company has also entered into an agreement to buy NetDragon Websoft and other leading mobile application market places. This would help Baidu make inroads in mobile market as though it dominates Chinese internet search landscape with more than 81% marketshare, it is facing tough competition in mobile space from newer players.
But there are some who believe that the company does not deserve the valuation it is commanding at present. They put forward the argument that company may not grow more than 20% during the long term. And currently, it commands a multiple of more than 31. Hence this mismatch is bound to get corrected in times to come and hence advise caution for the investors.
