Has an Expectations Gap

China's Internet search leader reports amazing earningsand its share price slumps on a merely stellar forecast. What gives?

There are some wicked expectations riding on China's leading search engine player and NASDAQ phenom (BIDU). On July 26, after the U.S. markets closed, the Beijing-based Net concern reported that earnings nearly quadrupled to $7.3 million and revenues vaulted 175% to $24 million year-on-year. Market reaction: Baidu's share price slumped 15% to around $78.50 in after-hours trading on signs the company's future growth would just be stellar—instead of phenomenal.

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