Friday, July 14, 2006

Calls of Note Part 3

- Piper Jaffray is out saying they think it's time to own Bidu (NASDAQ:BIDU). Firm notes many institutional investors have avoided Baidu stock in the past, based on well-placed concerns on unsustainable valuation. They believe the significant strengthening of Baidu's position in China's search market, and the company's continued outperformance now supports the current valuation, which has moderated significantly since the high days post-company IPO. In fact, they believe the stock is worth notably more than the current levels, and thus are raising their rating to Outperform.

Piper notes that their revenue estimates for 2006 have increased by 57%, since they published their first model on Baidu, due to Baidu's much better performance. Similarly, firm's 2007 estimates have gone up by 122% in the same period, making the price target valuation multiple go from 52x (original PE multiple) '07E EPS to the current 55x. Equally important, in firm's view, is that Baidu has cracked the code on China's search, which they believe is different from the U.S. search market, allowing the company to gain a dominant and largely defensible advantage. Google's competitive threat, which they feared for much of last year, seems to have not materialized.

Firm's price tgt goes to $110 from $75.

Notablecalls: Expect BIDU to see strong interest on the call. Bet Stevie's happy.

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