Chinese-language search engine Baidu ranks among Merrion Stockbrokers’ “medium risk” stock picks for 2013, with equity analysts at the firm tipping it to benefit from an increase in smartphone penetration as well as a return to higher growth rates in the Chinese economy.
Concerns about increased competition from its rival Qihoo 360, one of the factors that have contributed to a 30 per cent decline in Baidu’s share price from its peak, look “materially overdone”, Merrion forecasts.
Qihoo, an anti-virus and web browser company that launched a search engine last August, soared in intraday stock trading on its New York listing on New Year’s Eve as investors digested the prospect that it will form an advertising revenue partnership with Google while continuing to build its own platform to profit from search ads.
Optimism about Qihoo’s future in search is already built into its share price: its stock has recently been trading at around 35 times its estimated earnings, compared with a ratio of 17 times expected earnings at Baidu.
However, Merrion posits that Baidu’s head start in terms of market share and technology should ensure that it retains a dominant market position as it makes the transition from PC search to mobile search.
