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Last Updated: Thursday, 15 September 2005, 09:20 GMT 10:20 UK
Baidu tumbles on pricing worries
Baidu staff and Nasdaq officials celebrate the company's stock market debut
A lot of the excitement from Baidu's share listing has started to fade
Shares in Chinese search engine Baidu.com have tumbled after two firms involved in its stock market listing said prices had shot too high.

Demand among investors for a piece of Baidu - dubbed the Chinese Google - has driven the share price to more than $81 since it listed at $27 in New York.

But as the hype eases questions are being asked about Baidu's growth rate.

Analysts from Goldman Sachs and Piper Jaffray, which helped manage its Nasdaq debut, said $45 was a fairer price.

Too far, too fast

The problem facing many companies is that despite China's potential for growth being well documented, building a very profitable business will take time and investment.

While Baidu is well placed to benefit from the increasing number of Chinese people logging on to the internet, the market may have been guilty of overestimating its potential for quickly boosting earnings.

At the same time as it announced a net profit of 12.1m yuan ($1.5m; 830,000), Baidu also warned that its pace of growth was likely to slow in coming months.

In a report on Baidu, Goldman Sachs analyst Anthony Noto said that even his "more aggressive scenarios" for earnings forecasts cannot justify the current share price.

Mr Noto puts the stock's fair value at between $27 and $45.

In a separate report, Piper Jaffray analyst Safa Rashtchy said that Baidu's current valuation was "off the chart" and put a fair market value of $45 on its shares.

Baidu declined to comment on its share price or the analyst reports, but said it was committed to "building long-term value".


SEE ALSO:
How the web is taking off in China
13 Sep 05 |  Business
Google loses China market share
30 Aug 05 |  Business
Market sees Baidu growth slowing
24 Aug 05 |  Business
Chinese web firm to join Nasdaq
05 Aug 05 |  Business
Google seeks out China's billions
11 May 05 |  Business
All roads lead east for web firms
11 Aug 05 |  Business


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