Tuesday, September 13, 2005

Against the Street: Portrait of a Future Bloodbath

Celgene and Baidu.com had huge run ups on Monday.

This is nonsense.

We're reiterating our Sell Ratings on both these stocks.

We're deep contrarians, as Wall Street is inexplicably in love with both of these companies.

Celgene (CELG) has one blockbuster on the market; it's other drug should get its FDA hearing this week.

CELG trades at a lofty 100 X earnings.

Ya, ya, I know.

We should pay high multiples for biotechs.

But Celgene is a two trick pony.

And what's up with Baidu.com (BIDU)?

It was looking like 2005's version of Taser International after it gapped up this morning.

If you've been visiting this site at all in the last 4 weeks, you know how bearish we are on BIDU:

The stock trades at more than 1,500 X 2005 earnings and we're talking about a company that did less than 2 million in net income last year. Yes, its a hot Net play in an emerging market, but the bulls will come to light and realize they're paying for pennies with crisp dollar bills. Catablast! Media Group has a table-pounding SELL rec on BIDU. If you own it, get out now. If you're yelling "China, China," it is time for a reality fix. The stock will be at 60$ inside of 4-5 weeks, if not sooner.
That was us post-IPO.

And that's us today.

Day traders are all over this one.

The runup is due to the fact that underwriters have started initiating their analyst coverage this week.

On Monday, Morgan Stanley's positive outlook on Chinese Internet ADRs reverberated through the market.

In a 118 page report on the merits of investing in China, Mary Meeker said "China is No.1 in the world in mobile subscribers and No. 1 in Internet users under the age of 30; this evolving presence on the world state should not be underestimated."

That's all noise -- and you need to make sure you're filtering it out.

The ebAy acquistion of Skype (and yes, they overpaid) is also throwing off a lot of fireworks among the Internet contents.

Our prognosis on Baidu remains the same -- get out.

Prepare for a bloodbath tanking not if, but when the analysts get squeamish on us.

And as far as Celgene is concerned -- ring the register, dolly.

Another FDA delay for Celgene isn't thinking too unrealistically, is it?

Regulators are weighing whether Revlimid, which CELG is trying to sell as an anemia treatment, is too toxic.

Revlimid is a newer version of thalidomide, which has been linked to severe birth defects.

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