Wednesday, July 23, 2008

Baidu.com (BIDU), Amazon.com (AMZN) - Party Like its 1999?

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Mmmm... two "dot coms" doing well in 1 evening, I just had a flashback to another century. I just have to ignore the valuations in both (another flashback to the late 90s) as they keep on producing.

Baidu.com (BIDU) first since we own it (we cut back going into earnings) - this name trades at a multiple of... err.. nevermind that.
  • Baidu.com Inc (BIDU), China's top search engine, said on Wednesday its quarterly profit rose 87 percent and forecast another surge in revenue, boosted by Internet traffic growth ahead from the Beijing Olympics.
  • Beijing-based Baidu posted a second-quarter profit of 265 million yuan ($38.6 million) for the three months ended June 30, compared with 141.9 million yuan a year earlier. The result beat the average expectation for net profit of $35.5 million, according to eight analysts polled by Reuters Estimates.
  • Revenue doubled to 802.6 million yuan ($117 million) in the quarter, compared with 401.3 million yuan a year earlier.
  • The company forecast revenue in the current quarter in a range between $905 million yuan ($132 million) and $935 million yuan ($136 million), representing a rise of between 82 percent to 88 percent from a year earlier. Analysts, on average, are forecasting third-quarter revenue of $135.76 million, according to Reuters.
  • Baidu dominated China's Web search market in the second quarter, with market share of nearly 63 percent, according to data firm iResearch. Google Inc (GOOG) had 26 percent and Yahoo China was third with nearly 8 percent of the 1.3 billion yuan ($190.6 million) market, it said.
Amazon.com (AMZN) also looks somewhat impressive; at least the market is happy as expectations seem to have been lowered. I guess the thesis of the pooring consumer sitting at home trying to save money by not driving to stores works for them - shows you their superiority to say an Ebay (EBAY). Valuation is still a worry here, but no gap filling will be going on here anytime soon it appears.
  • Amazon.com Inc's (AMZN) quarterly net income doubled from a year ago and beat Wall Street targets, though much of the gain was related to the sale of European DVD rental assets, confusing some investors. The after-hours share weakness may have been a reaction to a $53 million non-cash gain from selling the European DVD rental assets, said analyst Dan Geiman at McAdams Wright Ragen.
  • "You back out that one-time item and it was pretty much an in-line quarter," Geiman said.
  • Amazon posted second-quarter net profit of $158 million, or 37 cents per share, compared with $78 million, or 19 cents per share, a year earlier. Revenue in the quarter, which is seasonally the slowest, rose to $4.06 billion.
  • Seattle-based Amazon, which has been lowering prices on many goods to spur purchases during the U.S. economic downturn, reported a rise in operating profit margin to 5.3 percent of total sales from 4.0 percent a year ago.
  • North America segment sales, representing the company's U.S. and Canadian sites, were up 35% from a year ago to $2.17 billion. International sales, representing the company's U.K., German, Japanese, French and Chinese sites, were up 47% to $1.89 billion. Excluding the impact of foreign-exchange rates, international sales grew 34%. (Any company still growing US centric sales at pace with foreign sales - you have to tip your hat at least a little)
  • "Given the state of the economy, this is a very impressive performance," said Sanford Bernstein analyst Jeff Lindsay. "But it is not quite as impressive as the initial figures might look."
  • "The big issue for us is the margin guidance is really, really bad," said Tim Boyd of American Technology Research, who has a sell rating on the stock. "Basically we're back to the old Amazon. Anyone can grow their top line if they ignore margins." (boo yah - but you know investors in this day and age - they never get past the headline "beat" or "miss")
Both these stocks are too rich for me, but the former has far fewer headwinds so I'll justify it in the portfolio, although much like Apple (AAPL) I have a hard time building it into a major position simply due to valuation, and what I'd consider a cap on upside because of how expensive they are at current levels. Even with fantastic growth rates. But still worthy of holding in each case.

Granted neither is as good as Washington Mutual or Fannie Mae, but what do I know.

Long Baidu.com, Apple in fund; no personal position


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