It Trades at Only 6x 2020 Earnings

by Johnny Debacle

Baidu (NASDAQ: BIDU) trades at 122x on a trailing PE basis. LTM earning per share are $2.88 and the stock trades at $329. Think about it. There are 1 billion people in China, I know, yes I know. Also I am familiar with the well know equation that Google + China = 122x. But let’s be serious here. 122x!

They can have all the market share, be in the best most profitable industry in the history of mankind and have all the people in their market they want, but if they aren’t actually making much money off of it despite trying for several years now, doesn’t that tell people something? Maybe, a small clue?

But reason isn’t enough in analyzing investments. Consider that the stock trades at a conservative 6x expected 2020 earnings. You need to make these kind of adjustments in your analysis if you ever want to be able to participate in a herd.

Recommendation: Sometimes the herd goes right off the cliff. But sometimes the herd kills the bad cowboy when the good cowboy lets the herd lose to distract or incapacitate the bad cowboy. Other times the herd stops and eats grass and enjoys a beautiful sunny day in the plains, soaking in life without a care in the world. Long all that.

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POSTED: 06/18/08 11:50 AM
Comment (17)


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Comments

  1. Juan
    June 18th, 2008 | 12:07 pm

    How does that Hater-ade taste? Delicious?

  2. Mr Juggles
    June 18th, 2008 | 1:07 pm

    Long or Short Capital has no position in Baidu. Long or Short Capital has shorted the shit out of the Juan.

  3. Digdug
    June 18th, 2008 | 1:43 pm

    Based on past analysis, if management can be prevailed upon to employ the power of “OO” and change the name to Baidoo.com, this multiple should swell to at least 244x

  4. lowellfield
    June 18th, 2008 | 2:57 pm

    In fairness, it’s only 70x on a fwd basis, and it’s growing like a weed.

    Do links work here?

  5. Jay
    June 18th, 2008 | 7:07 pm

    lowellfield,

    as Mr. Juggles points out, in ALL fairness, it’s only 6x on a really really forward basis.

  6. Anal_yst
    June 18th, 2008 | 8:51 pm

    @ lowellfield

    Did you REALLY just link to AOL Finance for your ftm info? REALLY?

    ’nuff said

  7. Cincinnatus C
    June 18th, 2008 | 10:58 pm

    score:

    juggles and analyst: 2 (combined)

    juan and lowellfield: 0 (combined)

  8. JImbob
    June 19th, 2008 | 8:07 am

    In all fairness to Lowollwhatever, does it really matter where you link to for forward estimates on the intertubes? Is yahoo finance much better?

    I dunn, I hate to see a shutout.

  9. To The Hilt
    June 19th, 2008 | 8:57 am

    I don’t think P/E is a good metric here.

    I would suggest P/EBE would be a better multiple to use.

    But I think you guys are forgetting that there are a billion people in China.

    Really, the only model capable of valuing BIDU is the Chinese Residual Income Model.

    Let me walk you through it:

    Take the company’s book value, and multiply it by the current population of China (that’s more than a billion, since you apparently don’t know that); then add the sum of all future Chinese Residual Income ( EBE – ( Rce * BV ) ); and then discount by the Required Return on Chinese Equity, which is ( 1 / Population of China ), which is more than a billion.

    I can’t stress enough how important it is to remember that there are more than a billion people in China.

    I’m pretty sure you can access this model on AOL finance. If anything, I would say BIDU is undervalued. I think it’s worth approximately infinity dollars, and would strongly urge purchasing BIDU in all accounts. Without regard to suitability, since that’s all just a bunch of bullshit.

  10. Dave
    June 19th, 2008 | 9:26 am

    Considering that Baidu’s most popular feature is easy theft of copyrighted music, these are definitely the kind of investors we need in the NYSE. Never mind Baidoooooo, we need to sell these people on Microdu.

  11. lowellfield
    June 19th, 2008 | 9:39 am

    I linked to AOL because it has pretty charts, and I was being somewhat tongue in cheek about it being “only” 70x on a fwd basis.

    Disclosure: No position in BIDU, short smug blog commenters

  12. Mr Juggles
    June 19th, 2008 | 10:19 am

    We are smug but we are not blog commenters. We are blanalysts. So be long us.

    We are ok with linking to info anywhere. Information, unlike man, has no taint.

  13. born to lose
    June 19th, 2008 | 12:54 pm

    Aren’t “blanalysts” guys who collect stamps?

  14. s75
    June 20th, 2008 | 11:26 am

    in other news … electric stingrays: foot soldiers of the giant squid revolution?

    http://www.mailonsunday.co.uk/news/article-1027624/Killer-stingray-British-coast-experts-warn-arrive-global-warming.html

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    June 23rd, 2008 | 3:26 am

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    June 23rd, 2008 | 8:11 am

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  17. Anal_yst
    June 24th, 2008 | 12:25 am

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