Watch Out Baidu, Here Comes Qihoo!

Baidu (NASDAQ:BIDU), China’s biggest Internet search provider, has some things to prove this quarter. Its shares have gained 8 percent so far this year, but analysts have expressed concerns over the company’s upcoming earnings. When it reports fourth-quarter earnings after the stock market closes on Monday, both investors and analysts will know whether the stock’s recent increases were based on overly lofty expectations or real earnings power.

The company faces a wide lineup of concerns: competition from recent search-market entrant Qihoo 360 Technology (NYSE:QIHU), increased margin pressures associated with the company’s added focus on its mobile platform, and high capital expenditures.

In a research note seen by Barron’s, Oppenheimer analysts Andy Yeung and Glorio Yu wrote that they believed Baidu was on track to meet or beat consensus earnings estimates. The analysts also raised their revenue and earnings targets for the fourth quarter. “While we remain cautious on BIDU in the near term as it navigates through a confluence of industry changes, the stock appears to be fairly valued, trading at an 18x 2013E P/E, relative to Google’s 17x, given BIDU’s higher growth rates and a rebound in China’s macroeconomic conditions,” they said…