Momentum Stock: Baidu, Inc.
Baidu, Inc. (NASDAQ:BIDU) recently hit a new all-time high above $100 on strong Q2 results from late July that included a 13% earnings surprise. With an average earnings surprise of 17% over the last four quarters and rising estimates, BIDU looks like a solid momentum pick.
Baidu, Inc. is an Internet search company based out of China. The company was founded in 2000 and has a market cap of $35 billion.
Our last look at Baidu’s business came on July 22 when the company reported strong Q2 results that came in ahead of expectations.
Revenue for the period was up 74% from last year to $282 million. Earnings also came in strong at 35 cents, 13% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 17% over the last four quarters.
The company’s strong results were driven by increased spending from existing customers, where revenue per online marketing customer was up 39% from last year.
Baidu also scored big on the expenses front, where its traffic acquisition cost (TAC) fell to 9.7% of revenue from 16% last year.
Bandwidth costs were also down, falling to 3.5% of revenue from 4.6% last year.
Awesome Balance Sheet
Baidu emerged from the quarter with its pristine balance sheet looking better than ever, with cash and equivalents up $182 million from last year to $610 million with no debt.
We did see some movement in estimates off the good quarter, with the current year adding 4 cents to $1.39 and the next-year estimate climbing 8 cents to $2.17, a very bullish 56% growth projection.
In light of the big gains of the last year, the valuation picture does leave something to be desired, where shares trade with a forward P/E of 56X.
On the chart, BIDU recently hit a new all-time high after gaining with the market for most of the last 18 months. But in spite of the gains, the stochastic below the chart is signaling that shares are trading safely away from over-bought territory. Look for support from the trend line and short-term low on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.