Baidu.com, Inc. (BIDU) Braces for Manic Monday

Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is stepping up to the plate, and there’s a lot riding on tomorrow’s quarterly earnings report. The Chinese search giant disappointed investors last time out. It did beat bottom-line expectations — a streak that now stretches to an impressive 14 quarters in a row — but it fell short on the top.

The more problematic aspect of Baidu’s report was its guidance for the quarter, which it will report on after Monday’s market close. Baidu’s targeting revenue to climb 38% to 42% over the prior year’s fourth quarter — and that’s not only short of the 46% Wall Street was expecting, but it also implies a sequential decline.

Baidu wasn’t the only dot-com speedster to issue guidance calling for a sequential dip in revenue during the fourth quarter. Renren Inc (NYSE:RENN), China’s most popular social-networking website operator, also braced investors for a revenue decline between the third and fourth quarters. SINA Corp (NASDAQ:SINA)‘s November outlook of $132 million to $136 million in revenue for the quarter is a sharp drop from the $147.7 million it reported during Q3.

Clearly, there’s a seasonality aspect at play here, but this wasn’t really a problem when the companies were growing so quickly in previous years.

In that sense, Baidu’s the lucky one. Renren isn’t expected to be profitable until 2015 at the earliest. SINA, investing heavily to grow its wildly popular SINA Weibo microblogging platform, has posted seven consecutive quarters of year-over-year declines in profitability.

Baidu is still very profitable and building on it. The problem is that growth is decelerating at the company that commands roughly two-thirds of the search queries in China.

Into the pit
Baidu is still growing at a clip that would make stateside dot-coms envious. Analysts see earnings climbing 40% to $1.29 a share in Monday’s report. The smart money has to say Baidu will land just north of that target, bumping its streak of bottom-line beats to 15 consecutive quarters.

However, Baidu was growing faster before, and it will slow down in the future. Unless Baidu nudges the pros higher, Wall Street’s betting on earnings and revenue to climb 24% and 35%, respectively, in 2013.

That’s not bad on its own, and Baidu also happens to be trading at a reasonable 18 times this new year’s projected net income. That holds up favorably to Google Inc (NASDAQ:GOOG) , which hit an all-time high on Friday. The world’s largest online company trades at just 15 times this year’s forecasted profitability, but it’s also growing a lot slower than Baidu. Analysts see earnings and revenue climbing 17% and 15%, respectively, this year.

In short, Baidu may not be the speed demon it was in the past, but it is trading at a discount to its growth rate.

The surprising challenger
Baidu closed at $113.84 before reporting its poorly received third-quarter financials. The stock dropped as low as $85.96 by early December, but it has nearly clawed all the way back now. A strong report on Monday can naturally propel the stock above that mark, but a stinker could send the shares spiraling back into the double digits.