Is Baidu’s stock cheap at 150?

[Updated 10/08/2021] Baidu update

Baidu’s stock (NASDAQ: BIDU) has fallen 30%, from $ 216 to $ 150 since the end of 2020. In comparison, the S & P500 at large has risen 16% during the same period. Trefis analysis of Baidu review is $ 224, implying that the stock looks cheap at its current price. In September, all Chinese stocks fell in response to reports that Chinese real estate giant Evergrande Group could be forced into bankruptcy. During the year, Baidu shares mostly fell as China continued its regulatory crackdown. The company is not only likely to face strict antitrust rules. Regulators are also unlikely to approve the company’s $ 3.6 billion purchase of YY Live.

Overall, however, we believe Baidu at current price has upside potential due to expected revenue growth. We are waiting Baidu’s revenues to $ 17.7 billion for 2021. In addition, its net income is expected to be $ 3.3 billion, bringing EPS to $ 9.47. For fiscal 2022, revenue is expected to increase by $ 19.1 billion, bringing its net profit to $ 4 billion. This will increase the EPS figure to $ 11.55 which, together with the P / E multiple of 19.4x, will lead to Baidu’s assessment about $ 224, which is 48% more than the current market price.

[Updated 03/25/2021] Does Baidu stock have moderate upside potential?

Up 62% since the end of 2018, Baidu’s stock (NASDAQ: BIDU) has moderate upside potential. Baidu, the Chinese Google

rival, has seen its stock drop from $ 159 at the end of 2018 to nearly $ 257 now, compared to the S & P500 which has gained 59% since late 2018. The company mainly generates advertising revenue which has suffered from the pandemic due to the reduction by Chinese companies of their marketing budgets. To compensate for its addiction to advertising, the company has branched out into artificial intelligence, cloud computing, and other areas. In January, it started a new company to produce electric vehicles with help from Chinese automaker Geely. The company will provide smart driving technologies to the company while Geely will provide automotive manufacturing expertise. In 2020, the company saw its revenue and profit increase (due to increased operational efficiency) and its P / E multiple increased.

Despite the Covid-19 crisis, BIDU saw its turnover increase by 10% in 2020 mainly thanks to the digitalization of the industrial Internet. The company’s EBITDA margin increased to 26% for the year from 17% the previous year. In 2021, we forecast Baidu’s revenue to reach $ 17.9 billion. In addition, its net profit is expected to remain stable at around $ 3.34 billion, bringing its EPS to $ 9.74, which, together with the P / E multiple of around 29.4x, will lead to a valuation of Baidu d. ‘about $ 286, or 11% above its current level. market price.

[Updated 08/07/2020] Baidu Stock: Google’s Chinese rival has more potential despite 50% rally

After rising 50% from the lows in March this year, at the current price of around $ 125 per share, we believe Baidu’s stock (NASDAQ: BIDU) has more to do. China’s leading internet search provider has seen its stock underperform during the coronavirus crisis, falling 1% year-to-date (compared to S&P growth of 4%). Baidu’s stock is also around 46% lower than it was at the end of 2017, just over 2 years ago.

Great concerns about competition in the Chinese advertising market from competitors such as ByteDance, its growing reliance on its unprofitable iQiyi streaming video for revenue growth, and the popularity of apps such as WeChat from Tencent – drove the company’s shares down for the third year in a row. Although the decline in the company’s shares was partly self-inflicted, the overall online advertising market in China itself has slowed since the country’s economy began to slow amid U.S. trade tensions since. Last year. It should be noted that Baidu generates the majority of its revenue from online advertising. And the data it collects from users during this process, along with its presence and expansion into smart speakers, virtual assistants, and driverless cars, promises a potential growth trajectory in the automotive market. ‘artificial intelligence.

Although Baidu’s revenue grew 18% during the 2017-2019 period, this growth was more than offset by a 24% decline in profitability as the adjusted net margin fell from 26.2% in 2017 to 16.9% in 2019. The share price has fallen significantly during this period due to lower margins. This drop caused the P / E multiple to drop from 24x in 2017 to 17x in 2019. Although the multiple is currently at 2019 levels, we expect it to continue to grow through its investments in the sector. of AI.

So how has the coronavirus affected the stock?

Baidu’s first quarter revenue fell 7% year-on-year (year-on-year) to $ 3.18 billion, as shelter-in-place orders had a marked impact on the internet company’s sales . While revenue from its core business (flagship research, feed and artificial intelligence businesses) was down 13% year-on-year, iQiyi’s revenue grew 35% year-on-year in the first quarter. However, adjusted operating profit before tax increased 38% year-on-year on the strength of the margin numbers.

The internet company has successfully made the transition to mobile devices. The number of daily active users increased 28% year-on-year to 222 million, with in-app search queries up 45% year-on-year. Going forward, this growth could also offset headwinds from a weak online advertising market.

For the second quarter, Baidu is forecasting revenue of around $ 3.5 billion to $ 3.9 billion, a year-over-year growth of -5% to 4%. This assumes that basic income growth will range from -8% to 2% year-on-year. Baidu has not returned to its prime, but it is taking a few steps in the right direction as China begins to breathe new life into its economy. The company has invested heavily in its cloud computing segment in recent years and has announced plans to deploy 5 million smart cloud servers by 2030 and train 5 million AI experts over the next 5 years. Not all of its AI investments are generating significant revenue for the company yet, but should strengthen its business in the long run.

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Lee J. Murillo

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