Baidu.com, Inc. (ADR)(NASDAQ:BIDU) Resumes Weakness After Rallying On Friday
Shares of Baidu.com, Inc. (ADR)(NASDAQ:BIDU) slid 2.73% to $111.84 after soaring over 5% in the previous trading session. The stock has been showing heavy selling pressure over the past two months and has lost about 28% since late April.
Last week, Oppenheimer & Co.’s Andy Yeung this morning reiterates a “Perform” rating on shares of Chinese search engine giant Baidu (BIDU), writing that while the stock has an “increasingly attractive valuation,” he’s concerned about how the company will “navigate” the “transition” he sees this year, meaning its challenge to monetize mobile use of the Internet.
“it is increasingly important for BIDU to monetize internet search traffic,” writes Yeung, though he sees the company challenged to do so since it is not the “default” search engine on Apple‘s (NASDAQ:AAPL) iPhone, nor on devices using Google‘s (NASDAQ:GOOG) Android operating system.
“While Baidu dominates Chinese internet search services with close to 80% market share, it only has 34% market share (50%, according to Baidu) in the mobile search market, trailed by Easou, Tencent’s SoSo and Google with 22%, 21% and 11% market share, respectively,” writes Yeung.
Baidu can remedy that situation through a revenue-sharing deal with either Apple or Google in China, he suggests, and it may need to form partnerships with “OEM-neutral app providers, such as UCWeb in the mobile browser market and AutoNavi in mobile map and navigation services.”
Yeung adds that he is “warming up to the stock based on its increasingly attractive valuation, its growing dominance in paid search in China and a likely pick-up in macroeconomic growth in 2H12.” He estimates the stock has a 25 times multiple of this year’s projected $4.72 per share in profit.