Reuters, quoting the Xinhua news agency, reports that Baidu, Inc. (BIDU) is going to get penalized by China’s Ministry of Culture for allowing unlawful music downloads. The government is expected to reprimand 14 internet sites which have offered illegal music downloads irrespective of repetitive warnings not to. Baidu says it will take swift measures to eliminate links to any files which have been identified by the ministry.
The move by China’s Ministry of Culture poses near-term threat to the company’s leaping stock price as uncertainty over the severity of the penalty remains.
[From Reuters]: “There have always been legal issues with Baidu music,” said Dick Wei, a Hong Kong-based analyst with JPMorgan, adding that the impact on Baidu would be clearer once the exact punishment was known.
In January last year, a Beijing court cleared Baidu of copyright infringement and said the search engine did not break any laws.
“This will have an impact on their stock price. I think investors in the United States will react on this,” said Fiona Zhou, an analyst with Shanghai-based consulting firm Pacific Epoch.
Baidu shares gained $1.35, or 0.91%, to $150.00 at 12:09 pm E.T. in Nasdaq composite trading. The stock currently trades at a 32.56x on a price to sales basis. The equity has a trailing P/E of 96.53, a forward P/E of 40.11 and a P/E to Growth ratio of 1.00. The median Wall Street price target on the stock is $143.10 with a high target of $200.00. BIDU shares have risen 54% this year, outpacing the 6.3% rise in the Nasdaq.