Sohu.com Inc (SOHU), Baidu.com, Inc. (ADR) (BIDU), SINA Corp (SINA): Chinese Internet Companies Not Affected by the Credit Crunch

Mad potential, mad valuation

SINA Corp (NASDAQ:SINA) is a leading online media company and value-added information service provider for Chinese communities both inside and outside of China, targeting overseas audiences through region-specific websites. Its massive traffic has helped it attract advertisers in the past and should continue to do so as corporate budgets expand.

One of the main growth drivers for this company over the next few years will be its Twitter-like service, Weibo. Providing high client stickiness and traffic and massive information on user profile and behavioral patterns, Weibo will help SINA Corp (NASDAQ:SINA) attract more advertisers and increase its cross-selling capabilities, further profiting from online gaming, app stores and online payment systems in the longer term. Moreover, its well-educated audience makes its webpages even more attractive for advertisers. The rapidly increasing use of smartphones and tablets in China is the other big growth catalyst for SINA Corp (NASDAQ:SINA).

Analysts expect SINA Corp (NASDAQ:SINA) to deliver an average annual EPS growth rate above 200%, over 10 times higher than its peers’ average. Although most of this optimism seems priced in the stock, which already trades at 115 times its earnings, this is a stock to buy and hold, if you are willing to pay the premium. Upside potential is just…mad!

Bottom line

Above I have analyzed three companies that seem to be dodging the effects of the Chinese credit crunch. In spite of a slowing economic growth, these firms seem poised to outperform the market, benefiting from secular tailwinds in the longer term, thus delivering plenty of upside. Although all three offer compelling investment prospects, their valuations set them apart. Offering a balance between these two characteristics (outlook and valuation), I’d say Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is probably the best choice; nevertheless, if I could, I would definitely add all three to my long-term portfolio.

The article Chinese Internet Companies Not Affected by the Credit Crunch originally appeared on Fool.com and is written by Damian Illia.

Damian Illia has no position in any stocks mentioned. The Motley Fool recommends Baidu, SINA , and Sohu.com. The Motley Fool owns shares of Baidu. Damian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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