Thursday, February 14, 2008 (NASDAQ:BIDU): A short here?

Several firms are commenting on (NASDAQ:BIDU) this morning after the co issued in-line results and weaker guidance last night:

- RBC Capital is upgrading their rating to Outperform from Sector Perform, while lowering tgt to $361 from $400 tellin investors to look through the 1Q08 guidance and focus on what is important. They believe 1) the long-term investment thesis remains intact, 2) the company continues to dominate the Chinese search market, and 3) over the longer-term should add another growth driver as it monetizes its nonsearch traffic through display and other formats. 1Q08 guidance was lower than expected, but as we exit 1Q and enter 2Q very few companies on the Internet enjoy every secular, macro, and seasonal factor working in their favor and fewer have Baidu's growth profile.

- Citigroup notes that early last month when they took Baidu off our Top Picks list and downgraded it to Hold, their concern was primarily that incremental spend on Japan and C2C would hit margins, but we were also concerned about the potential of slowing rev growth as well. Some of those fears came to fruition today as Baidu guided for between US$25m and US$35m in "P&L" impact from Japan+C2C in 2008. Combined this with disappointing rev guidance for 1Q, and the firm expects Street estimates have to come down.

The headline EPS beat is US$0.17, but the firm estimates that US$0.20-0.23 of this is due to: 1) a one-time tax rebate; 2) positive current effects from RMB appreciation; and most significantly, 3) the company's under-spent by ~US$5m on Japan vs. their 4Q guidance (and which is offset by the huge 2008 Japan spend guidance). Maintains Hold and $350 tgt.

- Goldman Sachs is lowering their tgt to $280 from $310 saying they believe the law of large numbers, rather than snow storms, could be the primary reason why Baidu is guiding for a decelerating yoy growth rate in 1Q08 versus 4Q07.

Notablecalls: Looks like RBC Capital's Stephen Ju was right on the money when it came to Q1 guidance. He was wrong on the sentiment side, though. And so was I. BIDU ended up 20 pts in after market despite a 20+ pt run during mkt hrs.

Which now pegs the question- is there any upside left here?

With GSCO cutting their tgt to $280 and most of the EPS upside coming from non-operating sources, it's sure a strech here.

I suspect shorting around $280 this AM represents a good risk/reward scenario.

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