If you haven't heard, China's largest and most popular internet search engine posted its third quarter earnings yesterday after the market closed in New York. Here are some figures: net income more than doubled to 181.7 million yuan, revenues also more than doubled to 496.5M yuan, Baidu recorded a 39% increase in online customers (advertisers) to 143,000. R&D expenses climbed 53%, while sales and marketing expenses rose 57%.
But that wasn't exciting for me. What was more interesting was everyone's perceptions on Baidu. I remember reading an online forum yesterday with someone saying that they won't be able to pay their bills because Baidu was down something like 1% in afterhours trading. Perhaps something has finally gone wrong with Baidu and earnings were down in Q3 (and those institutions knew about it), was what everyone was thinking. But it wasn't, which brings me to another interesting point.
As I was waiting for the results to come out like everybody was, hounding the statements like a school report card, someone suddenly came out with good news: $0.70 diluted EPS. And everyone was elated, because someone said the $0.63 EPS estimate was blown out of the water. But wait, where did that figure come from? On my other screen, it said $0.7 EPS was the mean estimate from 8 analysts. Did someone have their own analysts and blow their own data out of the water? (Note: Baidu did better than $0.7 EPS actually, with $0.72 adjusted EPS, but that didn't matter it seems).
Now everyone is stirring but no one knew the answer. So what do they do? Buy anyway. The moral of the story is this: 1. if you're going to invest in China, do it for the long run, otherwise exit now before you lose all your money when the herd gets scared and start selling; and 2. never listen to online forums and listen to yourself, because they don't know the data better than you do.
Some exciting news about Baidu before I leave you for the weekend:
- Baidu plans to compete in the Chinese auctioning market by launching an eBay like program: currently Alibaba controls that market.
- As I said earlier and reiterated by management, Baidu has a 61.5% market share in China, 31% more than its nearest rival, Google.
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