Saturday, April 10, 2010

Google & Baidu: A Tale of Two Tech Stocks (4-9-10 Close)

GOOG & BIDU


Google and Baidu (and Apple)


Overview
Google's censorship conflict with China has beat down the Google stock price, but this has benefited Baidu tremendously. Baidu has the largest search engine market share in China (65%) and stands to gain the most from this controversy. Accordingly, as Google stock has decreased, Baidu stock has increased. I'll review both stocks and comment on the price action. Latest developments are (1) Google's internet license in China expired March 31 and Google has not attempted to renew it, (2) Google's mobile search is apparently working in China, and (3) Apple has announced the iAd, a mobile advertising platform, sheesh.

Price Earnings Ratio
Google is expected to beat Q1 estimates, so the short-term is good, probably very good. Of course, it's the long-term outlook that is dampened by the Chinese issue and the world's largest internet market plus the Apple iAd. The question is how much investors will discount Google's PE and I think the bottom is in. Google's PE TTM continues at about 27+, while Baidu's TTM PE has reached 100, from the mid 90s.

Apple iAd
First China, now Apple takes a shot at Google.  Steve Jobs and Apple announced this week a new mobile advertising platform along with the iPhone OS 4 and iPad.  The last few weeks have belong to Apple, lol.  Obviously, the iAd platform is a threat to Google's advertising revenues, since Apple has made it clear it is going in the mobile advertising business.  First GOOG has a China Beat Down, now an Apple Beat Down?  AAPL stock is reviewed by Apple Digest here.


Google: China, then Apple, and the Bottom Is Still In


Overview
GOOG is down -0.45% for the week, down -0.16% for the month, down -8.67% for the year, and up +94.65% since the March 9, 2009 market bottom. Googzilla has rallied from the China Beat Down after bottoming with a March 23 closing low of 549.00. The censorship conflict with China, and high probability of leaving the huge Chinese market, had damaged the stock price. Actually, GOOG's short-term operating performance is expected to be very good, exceeding Q1 estimates. Of course, it's the long-term outlook, with the seeming loss of the Chinese market, that is of concern.  Now, having found support from the China Beat Down, GOOG must reckon with the Apple iAd in the USA and elsewhere...

Google Daily Chart
Below is the GOOG daily chart from November 2009 through the current close.

Noteworthy Closing Prices on Daily Chart below:
Current 566.22 (Third highest yellow horizontal line)
2010 YTD 1-4-10 High 626.75 (Highest yellow horizontal line)
YE 12-31-09 619.98 (Second highest yellow horizontal line)
10 Month EMA 528.39 (Lowest yellow horizontal line)


GOOG: Reasonable, Neutral Price?




Intermediate-Term Trend
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, flipped to an intermediate-term bull market Wednesday, March 24. A bear market signal had previously been effect since February 1 for GOOG. That is, the 25d sma is now more than the 50d sma. For all the ups, down, and consolidations in 2010, GOOG is sustaining at a reasonable price - all things considered.

Support
Solid support has been critical for GOOG during the China & Apple Beat Down - and support has held. GOOG has now risen above October 2009 trading range, which was recent support that held. The current price is now in the stair stepping trading of November 2009 plus long-term support that held from back in May and June 2008. GOOG is now in the consolidation trading that began March 5. GOOG is also in the middle of the long-term support trading range of April through July 2008 that held in the recent downturn.

Resistance
The current price is well below the January 4, 2010 YTD closing high and the 12-31-09 YE close, both now important recent resistance and benchmark prices. Important recent resistance just above is the March 11 peak of 581.14. This close was the peak before the China Beat Down. Longer term resistance is the May 5, 2008 peak of 594.90, along with other associated peaks during May and June 2008. GOOG has now pulled back into the March 5 through present trading range.

Moving Averages
The 25d sma bottomed on March 1 and is ascending. The 50d has began to ascend.  The 100d sma has leveled off and began to slightly descend. The 200d sma continues ascending. Most bothersome was the 25d sma breaking down through the 50d and 100d sma's plus the 50d sma breaking down through the 100d sma on March 4.. The 25d sma has now regained the 50d sma, but not the 100d sma. The 50d sma has not regained the 100d sma.  GOOG has been testing the 25d sma the last 3 days and is still just below the 100d sma.

Uptrend Line
The uptrend line, a rate of price ascent, is from the November 24, 2008 closing low of 257.44 up through the February 25, 2010 closing low of 526.43. The February 25 closing low has been the bottom of the 2010 pullback. GOOG has stayed above this uptrend line since the next day, February 26 - but - almost pinned it on Tuesday, March 23 at the bottom of the trading day before rallyiing and did in fact pin through this uptrend line on Wednesday, March 24, before rallying once again. GOOG is managing to stay above the uptrend line...

Downtrend Line
The downtrend line, a rate of price descent, is from appoximately the November 6, 2007 all-time closing high of 741.79 down through the January 4, 2010 high of 626.75, the peak YTD closing high so far. GOOG continues well below this downtrend line.

Relative Strength Index (RSI)
RSI 14 day = 56.68 is reasonable, neutral
RSI 28 day = 62.83 is reasonable, somewhat neutral
The RSIs sum it up - GOOG is priced reasonable, neutral.

MACD (12,26,9)
The MACD became bearish on Wednesay, April 7.. The MACD has been hovering around the 0.00 line and +-1.00 for 14 trading days now.  The signal is more neutral than anything else.

Long-Term Trend
The lowest horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. GOOG is above this signal at the current close, the third highest yellow horizontal line.

Conclusion
Currently GOOG is priced reasonable, neutral, period.  Is the China Beat Down over for GOOG? How will Apple iAd impact Google? GOOG is surviving! Both recent and long-term support has held and an upward bounce ensued off the closing low of March 23 at 549.00, with good volume. The RSI 14 day and 28 day are reasonable, neutral.  The MACD signal is basically neutral.  At this point, it appears GOOG is out of China and it's a waiting game to see what the Chineses government does. The 2010 YTD lows in the 530 or lower area could possibly be tested again. However, as I noted in previous posts, I personally believe this won't happen and that the China Beat Down is about over. The future impact of Apple iAd is unknown, but does appear as a threat to Google.  That is, the potential loss of the Chinese market is mostly priced in but not necessarily the Apple iAd impact.. If China does throw Google out, another dip is possible and then the bottom would be in. The intermediate-term trend is bullish. The long-term trend remains bullish. The China and Apple story continues...


Baidu: At All-Time High $625.47


Overview
As GOOG pulled back due to the China censorship conflict, BIDU skyrocketed. BIDU is up +4.25% for the week, up +4.77% for the month, up +52.10% for the year, and up +303.32% since the March 9, 2009 market bottom. BIDU consolidated in the 600 area and now has gone higher.

Baidu Daily Chart
Below is the BIDU daily chart from November 2009 through the current close.

Noteworthy Closing Prices on Daily Chart below:
Current + All-Time High 4-9-10 625.47 (Highest yellow horizontal line)
YE 12-31-09 411.23 (Lowest yellow horizontal line)
10 Month EMA 460.52 (Middle yellow horizontal line)


BIDU: Is $600 The Bottom & Support?




Intermediate-Term Trend
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, indicates an ongoing bull market since February 5 for BIDU. That is, the 25d sma is more than the 50d sma.

Resistance and Support
The current closing price, the highest yellow horizontal line, is an all-time closing high.  There is no short-term resistance and there is no long-term resistance. There is much significant support below, especially in the 600 area consolidation trading.

Moving Averages
The 25d, 50d, 100d, and 200d sma''s are in a classic bull pattern of a rapidly rising stock: fanned out and ascending rapidly.

Uptrend Line
The uptrend line, a rate of price ascent, is from the December 10, 2008 closing low of 104.54 up through the January 12, 2010 closing low of 386.49. The January 12 closing low was the bottom of the 2010 pullback. BIDU is well above this uptrend line since the next day, January 13.

Downtrend Line
There is no downtrend line, a rate of price descent, of any significance, because BIDU ia at an all-time high.

Relative Strength Index (RSI)
RSI 14 day = 76.53 is overbought, but reasonable
RSI 28 day = 75.40 is overbought, but reasonable
The RSIs are indicating overbought but not excessively.  The consolidation trading from March 23 through April 5 has kept the RSIs down.

MACD (12,26,9)
The MACD is bearish and has been since March 31. BIDU had previously been bullish since February 3.

Long-Term Trend
The middle horizontal yellow line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. BIDU is well above this signal at the current close, the highest yellow horizontal line.

Conclusion
BIDU has peaked yet again at an all-time high, after consolidation trading in the 600 area. Analysts setting price targets of 650, 675, 690 due to Google's presumed exit from the Chiina internet market created a bull frenzy! China now has 384 million online users and expects to exceed 500 million users in 2-3 years per a recent news article. BIDU is in a prime position to capitalize on this almost incomprehensible growth. BIDU is already the leading search engine in China with an estimated 65% market share, that could go to 90% sans Google! So, there is more upside to BIDU both intermediate and long term, unless somehow Google stays in China and can compete effectively. Short term, BIDU is nearing the analysts price targets, so there could be a slowing of the price ascent.  Regardless, BIDU has a great future and the stock should continue upwards in 2010.


GOOG & BIDU

Seeking Alpha