Baidu (NASDAQ: BIDU), China's leading search engine, sold off during Monday's after-hours session after the earnings report for the third quarter was issued. When you're a theoretical growth company like Baidu, missing estimates on the guidance side is never a good thing to do.
Nevertheless, Baidu delivered in Q3 itself. Sales skyrocketed 39%. Net income per share exploded over 40% to the upside, coming in at $2.07 per share on a GAAP basis. Adjusting for items, the company earned $2.16 per share. Earnings.com gives an expectation of $1.81 for per-share profit.
But the market wasn't optimistic on the outlook, as Barron's makes clear. Baidu shares shed 13% in yesterday's extended trading session. Very ugly.
Yet, do you think this pull-back, if it carries over into Tuesday's regular session (I'm writing this ahead of the bell, but my guess is Baidu will be weak today), constitutes a useful buying opportunity?
Well, I was hesitant back in April to suggest Baidu as a stock to look at. Today, I'm more upbeat. Baidu, like Google (NASDAQ: GOOG), is a force in its industry. I didn't think the Q3 data points were bad at all. A significant pull-back might indeed be of value to traders and investors alike. Take a look at the distance between the 52-week low and the 52-week high at AOL quotes. There are plenty of believers in Baidu.
Be warned, though, to watch the major indexes. Is it me, or does the Dow seem to be falling under the weight of the magic number 10,000? Definitely too early to tell. But you must take this into consideration. The bounce off the lows made earlier in the year took just about all stocks along for the ride up. A correction could do the same thing, only in reverse. Caution is key.
Disclosure: I don't own any company mentioned; positions can change without notice.
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