Aside from providing a user-friendly Chinese language search platform, BIDU also has several third-party sites in addition to software applications, Japanese search services, online marketing services, and more. In fact, BIDU is even expanding its offerings to include EVs and also has a leading position in AI and cloud computing.
Can BIDU’s winning streak continue? Let’s find out.
BIDU by the Numbers
BIDU is currently trading around $210, meaning it is around $20 below its 52-week high of $227.58. The stock’s 52-week low is $82. BIDU has a forward P/E ratio of 21.40, indicating it might be a bit overpriced yet a P/E ratio above 20 is quite common for tech stocks such as BIDU.
The top analysts insist BIDU is overpriced as their average price target for the stock is $183.77, indicating it has a 12% downside. However, of the 13 analysts who have studied BIDU, 11 consider it a “Buy”, two consider it a “Hold” and none advise selling.
The POWR Ratings reveal BIDU is ranked third of 118 publicly traded China stocks. BIDU has “A” grades in the Peer Grade, Buy & Hold Grade, and Trade Grade components. BIDU had a 2020 price return of 71.08%. However, the stock’s three-year price return is -15.01%.
Is BIDU’s Dramatic Rise Warranted?
A large part of the reason why BIDU soared in December is the fact that it was reported the company has plans to enter the electric vehicle market. Reuters reported the news so it appears to be legitimate. Though BIDU would have to compete with the likes of NIO and Tesla if it were to enter the electric vehicle market, this rapidly growing market may include nearly every driver in the world within a couple of decades. Governments across the globe are currently making plans to force drivers to shift away from gas-powered vehicles to the electric variety, meaning companies that establish a strategic early position in the market will be set up for success across posterity.
It would be quite the leap for BIDU to segue from search engine technology to electric vehicles. However, it is important to note BIDU is tight with China’s government. The company’s Apollo software has been implemented as a key component of the totalitarian regime’s autonomous vehicle initiatives. BIDU may make a fairly seamless segue to the EV market with the assistance of the Chinese government.
Another reason why BIDU’s stock soared in December is its internal approval for a share buyback program escalating from $3 billion to more than $4 billion. This is a clear indication that BIDU’s brass believes its stock is significantly undervalued. As long as BIDU can find reliable manufacturing partners and its EV technology is comparable to that of the other top players in the market, there is a chance the company will succeed as an EV-maker.
Will BIDU’s Success Continue?
At this point, it is too difficult to predict whether BIDU’s hot streak will continue. It appears as though investors are taking profits off the table in the first trading week of the year. Furthermore, if BIDU’s leadership does not provide the investing public with information about its efforts to develop EVs that can compete with those made by the likes of Tesla and NIO, there is a chance impatient investors will take even more money off the table. BIDU is a solid long-term play but it might not be the best short-term play.
Still, there is a good chance bullish investor sentiment will continue as the start of the new year unfolds simply because Joe Biden won’t take a fervent anti-China stance upon replacing President Trump in the oval office. Biden probably won’t threaten the de-list BIDU or any other China stocks, a sharp deviation from the Trump administration’s anti-China stance. Therefore, it can be argued the top China stocks are at the beginning of a long runway that will propel them to success across the next four years or possibly even longer.
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BIDU shares rose $5.33 (+2.61%) in premarket trading Thursday. Year-to-date, BIDU has declined -2.59%, versus a -0.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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