For Baidu.com, two notes today, one from RBC Capital and one from Citigroup
- RBC Capital is upping their tgt on Baidu.com (NASDAQ:BIDU) to $333 from $302 saying they believe 3Q07 is tracking well as BIDU should be able to add at least as many advertisers as it did last quarter. July was better than June, August was flat to slightly better than July, and September is tracking to be better than August.
- Longer-term the firm believes company is reaching critical mass and e-commerce is starting to emerge as a key thematic catalyst. Their high-on-the-Street 2009 GAAP EPS projection of $7.58 may prove conservative as they believe there is an upward bias to estimates.
- Firm also notes that fully-loaded SG&A costs are about $11k for person for BIDU. It is likely 15 times this for Google.
- Citigroup is also out positive on Baidu.com (NASDAQ:BIDU) this morning saying that according to o the latest survey report on China's Search engine market, published by China IntelliConsulting Corporation (CIC) today, the China search market continues to concentrate with Baidu and Google accounting for 92.4% of total primary users, or 88.7% of total daily users in any given day.
- Baidu beats Google among high-end users - Baidu continues to excel in the high-end user market, encroaching on Google's traditional core users. Baidu's high-end share rose from 51.5% to 53.4% over the six-month period while Google's share slipped from 41.9% to 39.6%.
Just for a valuation check on 2008 EPS of $3.67, Baidu is now trading @ 68x - assuming that $3.67 get's blown out of the water and the number is closer to $4.00 that's still 62x earnings. However this 2009 $7.58 estimate by RBC just shows the amazing leverage in this name. By that measure the stock 'only' trades at 33x earnings. I use the word only in quotes for a reason... however, this scenario is reminding me a lot of Google (although the revenue growth is much lower then when Google came public) when everyone bemoaned the valuation while the stock price ramped quarter after quarter.
As to Research in Motion (RIMM), I decided to go with Apple (AAPL) as a more diversified play in the 'communications' sector/theme but the stock has been a rock since the August lows. Its 2008 valuation is now on par with Apple's. Per the RBC note:
- upping their tgt to $110 from $83 saying they expect additional upside for RIM shares, on: a) Robust product momentum (Curve, Worldphone, Pearl 2, 8820) driving FTM results above expectations; b) Pearl 2 and affordable BlackBerry data plans seen to advance RIM into a 4x consumer market; c) Strengthening global drivers (Europe, SA, Latin AM, CDMA EV-DO); d) continued competitive advantages.
- Sentiment is expected to further rise once RIM unveils Pearl 2, (launch CYQ3/Q4). A significant update, Pearl 2's stylish design, data speeds, iPhone-like browsing and compelling features may be viewed as a boost to RIM's further penetration into the 4x consumer market. RIM may sell 5M Pearl 2's FTM (vs. 2M Pearls sold since Sept/06 launch).
- Global checks suggest RIM saw vigorous sales momentum Q2/Q3 from Worldphone, Curve, Pearl, 8800, 8820, others. Competition (eg iPhone) hasn't apparently yet dented RIM's momentum. Firm is increasing F08 estimates to $5.8B Revenue and $2.11 EPS ($5.6B and $1.99 prior) above street for $5.5B/ $1.99. Reiterates Top Pick.
