Baidu shares at record levels on results optimism
By Eric Auchard
SAN FRANCISCO, July 2 (Reuters) - Shares of Chinese Web search leader Baidu.com Inc. (BIDU.OQ) jumped 11 percent to a new record on Monday, amid a raft of recent rating upgrades by analysts and optimism over quarterly results.
Citigroup also advised investors in a note on Monday to focus on the fact that China should surpass the United States in overall Internet users within two years. The brokerage sees the U.S.-listed Baidu as a likely beneficiary of that trend. The revenue consensus among seven analysts for Baidu's just-ended second quarter of $48.4 million remains below the outlook predicted in April by the company itself, which had forecast $48.9 million to $50.2 million for the period.
"I am expecting strong results for the second quarter. Things are trending well," Susquehanna analyst C. Ming Zhao said. Baidu is expected to report second-quarter results in late July or early August.
Steve Weinstein, an analyst with Pacific Crest Securities, was among the brokers who upgraded Baidu's stock last week, arguing that revenue should come in above the company's plan. "I felt really good about the fundamentals," he agreed.
Baidu shares gained $18.43 to close at $186.41, building on solid gains during the last three Nasdaq trading sessions.
Two weeks ago, the stock recovered to levels above $150 a share, the price it hit in the first days of its spectacular initial public offering in August 2005. Then, fears that a Chinese Internet bubble was taking shape sent the stock as low as $44.
With anticipated strong results and growing attention by global investors to Chinese Internet stocks, new investors are being attracted to Baidu, Zhao said. "Some investors only like to buy stocks as they hit new highs," he noted.
On Friday, Citigroup had said Baidu was its top pick among Chinese Internet stocks and argued that the company's results looked strong not only for the second quarter but heading into the second half of the year as well.
"We expect a solid Q2 (second quarter); equally importantly, the 3Q (third quarter) outlook should be strong," Citigroup analyst Mark Mahaney, who is now traveling in China, told investors.
Various estimates put Baidu with around two-thirds of the Chinese Web search traffic. Google, the dominant player in many other markets of the world, lags far behind Baidu with around a 30 percent chunk of the market, researchers say.
Zhao has argued in recent research that the expected initial public offering of Chinese e-commerce leader Alibaba.com will provide investors greater insight into the growth of e-commerce in China. As a Web search provider, Baidu is a derivative play on e-commerce, he argues.
Yahoo (YHOO.O) holds a large minority stake in Alibaba.com, the leading provider of Internet auction services in China, where it has pushed aside eBay Inc. (EBAY.O), the global auctions leader.
((Reporting by Eric Auchard in San Francisco; Telephone: +1 415 677 3919; E-mail: eric.auchard@reuters.com; editing by Deborah Cohen)) Keywords: CHINA INTERNET/
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