Baidu (BIDU) is a web services providing company based in China. Since the start of 2013, the company's stock has done exceptionally well and it looks like the upward movement will continue. Since the middle of July, the company's share has grown by more than 87% and is still showing an upward trend. However, it is not just a stock price we are talking about - the company has actually grown itself to a great extent.
Future Prospects
Recently, a lot of good news is coming out of the Baidu camp - analysts are expecting good results from the company. As a result, the market has been extremely happy with the company and the stock has almost doubled in the past six months. The company has been able to report impressive results and some very attractive products, resulting in some much needed love from the market.
Baidu has recently come up with security software for smartphones based on Android - as a result, the company is standing directly against Qihoo's mobile security software. Just in China Qihoo's users of mobile software have grown from 120 million to 338 million in a year, showing growth of about 182%. The growth rate clearly shows the potential of the market. Although Qihoo (QIHU) has the first mover advantage, Baidu's reputation can play a vital role in achieving a large chunk of the market share in this category.
Additionally, the company just made a deal with Viki, a business unit of Japanese giant Rukaten, which will allow the company to reach new heights. Viki is a website that allows people to subtitle videos from all around the world. It already has a monopoly over the Japanese market. Now, Viki and Baidu with joint hands could cover the whole Chinese market. This is because the product in hand is like YouTube, everybody uses it. Even if it is banned in a country, people find a way around with fake proxy software like Hotspot shield and Spotflux.
Be Cautious in the Short-Term, Be Optimistic For the Long-Term
Although the future prospects for the company are good and the stock is reflecting it every day, there is still a chance that the stock may pull back a little. The stock has almost doubled in the past six months, and some investors might want to cash in their profits. However, if you are long-term investors, then you need not worry as I believe the stock will continue to grow in the long-term.
One of the most important metrics for the company is revenue per online marketing customer - this specific metric increased by over 19% during the past three months, indicating that the company has real potential. The growth in online marketing customers is very impressive for the company. For the third quarter, the online marketing partners grew by over 19%, and currently the number stands at 464,000. If the growth in the number continues at the current rate, the company will have about $270 million in additional revenues at the same time next year. At the moment, Baidu gets $3,121 per online marketing customer.
As I mentioned above, the company has launched its security software for smartphones and I expect it to capture a substantial market share, and the Viki partnership will also play an important role for the company. As a result, the growth in revenue of about 40% may not be that difficult for the company to maintain in the next year.
Conclusion
China is a massive market and the company has a strong foothold in this market. The growth shown by Baidu is impressive and I believe there is a lot of room for the company to grow further. It is one of the very few technology companies that have been able to maintain impressive revenue growth in the face of increasing competition from local as well as foreign competitors. We might see a small pull-back in the short-term; however, long-term prospects of the company are bright and I expect Baidu to continue impressive growth over the next three to five years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Business relationship disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. IAEResearch is not a registered investment advisor or broker/dealer. This article was written by an analyst at IAEResearch and represents his/her personal opinion about the companies mentioned in the article. The article is for informational purposes only and it should not be taken as an investment advice. Investors are encouraged to conduct their own due diligence before making an investment decision. I am not receiving any compensation (other than from Seeking Alpha) for this article, and have no relationship with the companies mentioned in the article.
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