Goldman Sachs upgrades span style="font-weight: bold;"Baidu.com (NASDAQ:BIDU)/span to Buy from Neutral and adds it to their Conviction Buy List:br /br /Baidu trades at just under 20X 2009E non-GAAP earnings:br /br /1) Paid search spending is 2bp of GDP in China, versus 9-12bp in developed search markets.br /br /2) Goldman forecasts search spending climbing at around 30% per year for several years and believes Baidu can maintain query share (with government help and consumer loyalty) for around 30% per year revenue and EPS growth.br /br /3) Baidu has $10 net cash per share, a 35% 2008 ROE, and they estimate it will convert over 80% of earnings to free cash flow. The GS Options team suggests buying 1X2 call spreads for low-cost leverage.br /span style="font-weight: bold;"br /Catalyst/spanbr /1) They expect concern that the China government has targeted Baidu for punishment will diminish; they doubt the government seeks to disadvantage Baidu to ...

I have been coming across many comparisons between Apple (nasd: AAPL) and Google (nasd: GOOG) lately, especially given that Apple’s market cap surpassed Google’s last week. A recent example is Felix Salmon, who doesn’t think Apple should be worth more than Google as he argues in “Apple vs Google.” Mark Krieger compares Apple to Google and concludes Apple’s valuation is lofty and due for a pullback. The authors do make some great, valid points, yet their conclusion is ultimately flawed due to the failure of comparing on a free cash flow basis. Cash flow, not accounting earnings, determines an asset’s value. For the matter of an Apple-Google comparison, there are significant differences in free cash flow production, hence return on invested capital (ROIC).

I present the following analysis of the similarities/differences between the

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a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/_kaO6aTrkklM/SAxlLhB0igI/AAAAAAAAAN8/7basFxW-mu4/s1600-h/GOOG_banner.gif"img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="http://1.bp.blogspot.com/_kaO6aTrkklM/SAxlLhB0igI/AAAAAAAAAN8/7basFxW-mu4/s400/GOOG_banner.gif" border="0" alt="" id="BLOGGER_PHOTO_ID_5191635718970313218" //astrongdivspan class="Apple-style-span" style="font-weight: normal; "strongGoogle Inc (nasd:GOOG) $439.16/strong- Google shares have dropped about 40% from its high around $750 due to concerns of slowing growth. Considering the long-term picture, coupled with GOOG shares historically being overvalued, Google’s current valuation is attractive. Google a the dominant player on the internet with a strong competitive position that will provide sustained growth and high margins for many years. In the internet space, Google is a must-own, and finally its valuation is reasonable./spanbr //div/strongbr /strongOnline Advertising Market Growth:/strongbr /The internet is still growing in terms of users and usage- More people are spending more time online. Devices such as the iPhone, are contributing to this trend. Online advertising only accounts for 10% of total ad spending. As advertising on the web continues to grow, Google stands to capture ...