
Amazon and Baidu trade at almost exactly the same P/E ratios and I do hesitate going short a stock like Amazon that has so much momentum but it has went up so much in 2009 and it will face increased competition on products such as the Kindle (rumors of the upcomming Apple tablet are getting louder). As well, Amazon will probably face pressure from a lot of different areas that will result in lower prices and lower profit margins. The fact is that both “traditional” merchants such as Barnes and Nobles and newer companies like Apple and Google will be competing with Amazon as books and magazines head to the digital form.

The major point here is that while both companies do show growth, they do not really compare. In the past year, Amazon’s revenues have improved almost 30% which is very impressive but still far from Baidu’s revenues that have
grown about 40%. There is just so much potential for Baidu and little competition when you consider that its market is growing fast and that even Google has been unable to gain much market share from its Chinese competitor.

Baidu did slip when it announced its earnings because of diminished expectations for the next year, especially compared with expectations. But I honestly believe that things still look very bright for Baidu, especially when you consider that its valuation is almost identical to that of its much more mature Amazon competitor.

Disclaimer: No return is guaranteed and each recommendation should be considered within the investor’s individual situation. As with any financial investment, there are risks involved.
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Opening prices:
BIDU: 390.56$
AMZN: 123.00$
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