Olympic Hangover Could Sink Shares of Baidu (BIDU) -Canaccord Adams
Following a very successful Olympics, Canaccord Adams believes Baidu.com (Nasdaq: BIDU) could face a substantial slowdown in 2009 amid a weakening global economy and accelerating inflation. The firm maintains a Sell rating on shares of Baidu and has a $265 price target on the stock.
The firm cites several issues that could put downward pressure on shares of Baidu:
- growing inflation concerns in China: consumer prices were up 7.1% in June and up 6.3% in July
- currency appreciation has led to a 4.2% and 2.3% appreciation on the RMB during the first two quarters of this year
- GDP estimates for China are expected to fall to around 8%
- due to interruptions from the Olympics, Canaccord sees slowing growth in the back half of this year and,
- high valuations, ongoing MP3 litigation and lagging operating cash flow compared to sales and EPS growth could weigh on shares.
- Baidu's search engine remains to be the third-largest globally
- China is planning a stimulus package for about $58 billion, or 1-1.5% of GDP, during the second half of this year. The government is also expected to ease monetary policy over this period, and
- central banks are raising national and regional lending quotas by 5% and 10%, extending about $26 billion in lending for the rest of '08.
Baidu.com, Inc., through its subsidiaries, provides Chinese language Internet search services primarily in the People's Republic of China.
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