Remember the Google China Crisis? When Google threatened to quit China, their share price nose-dived whilst Baidu, the contender rocketed to record highs. That was back in January.
Skip forward a few months and Google are still in China, with little noise as to whether they will stay or go. Google’s share price started to recover this week, adding almost $40 a share since Monday. Baidu on the other hand suffered an analyst downgrade because Google are still in town.
Why is this important?
Well, Google’s share price pre-Christmas was at a record high of $630 per share. The higher the share price, the more Google can do, like buy companies and innovate. It also means they can continue to pour money into lesser performing areas like the Nexus One.
Baidu, on the other hand, was not doing so well before the Google announcement. Suffering from a string of analyst downgrades before Christmas, Baidu was struggling to show the profitability potential from their no. 2 position in China.
Then, the China news broke. Google share price plummeted over $100 a share, losing almost $15bn in market cap as a result. The flip side was a leap in Baidu share price rocketing them to an all time high of $525. The potential loss of Google in the China market was set for Baidu’s massive gain.
But, skip forward almost three months and Google are still in town. An analyst downgrade on Baidu stock was made purely on the reason that Google don’t look to be leaving anytime soon. The UBS analysts believe Google has a “50% likelihood of leaving China.”
So, for the time being Baidu won’t be stealing Google’s crown.
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