Who says there is no honesty in Wall Street research?

Last month, investment bank Goldman Sachs & Co. helped underwrite the initial public offering of Chinese Internet search engine firm Baidu.com Inc. The IPO was a huge hit, reminiscent of the giddiest days of the technology stock bubble, as investors snapped up shares in a company billed as the Chinese Google.

The stock soared to $122.54 from its $27 offering price on its first trading day. The shares dipped below $100 in the following days but popped back up to $113.59 on Tuesday.

Then on Wednesday, Goldman Internet analyst Anthony Noto issued his first research report on the company. He rated the stock "underperform" (another word for "sell") and said he could not justify its valuation. He did not mince words, saying the stock was probably worth $27 and at best $45, a level he noted was still 60 percent below the current price.

Noto listed risks to the company, including a Chinese Internet search market that produced less than $200 million in revenue in 2004, competition from bigger players such as Google Inc. and that Baidu operates under an unpredictable Communist government.

Another of Baidu's IPO underwriters, Piper Jaffray Cos., also came out with its first research rating on the company on Wednesday. And it, too, was a sell.

Analysts Safa Rashtchy and Aaron M. Kessler said the company's valuation is "off the chart" at about 123 times expected 2006 earnings. "The meteoric rise of Baidu's stock after its IPO has given the company valuation multiples far above both the large Chinese Internet names as well as the premier U.S. Internet companies," the analysts wrote.

Talk of the reports buzzed through Wall Street on Wednesday morning, and Baidu shares went into freefall. The stock finished down 28.4 percent at $81.32.

The two research reports (which also said the company had potential) come after a massive crackdown on biased Wall Street research. Investigations led by New York Attorney General Eliot L. Spitzer found that investment banks regularly issued overly bullish research reports on companies, especially Internet start-ups, to generate big banking fees.

Ten Wall Street firms paid $1.4 billion to settle the probes and agreed to erect a much firmer wall between research and banking.

So do the Piper Jaffray and Goldman reports mean the wall is holding?

Too soon to say, said Steven J. Massocca, head of equity trading at Pacific Growth Equities LLC in San Francisco. He also said it was too soon to say whether the two reports would kill the party in Baidu shares. "It will be very interesting to see how long-lasting the effect is, or if Baidu will trade back up to where it was."

Shares in Baidu.com plunged Wednesday after two investment banks said its stock price was overblown.