Baidu coins in 3 growing industries make it a buy – the Madison Leader Gazette
Baidu (NASDAQ:BIDU) has been a headache for investors. The Chinese internet search giant saw its shares drop in 2018 and 2019. At the end of 2020, they suddenly caught fire and continued to rise. Between the end of November 2020 and mid-February, the BIDU share jumped 150%. That’s phenomenal growth for a mature business.
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Since the close at $ 339.91 on February 19, BIDU has been in a downward spiral. Even after a two-week rally in May, stocks are currently trading at around $ 190. That’s down more than 40% from February and 13% from its 2021 opening.
What is happening at Baidu to cause such volatility in its action? Is the recent collapse of BIDU stock an opportunity to buy back stocks before the market comes to its senses? Or was it a warning to stay away?
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From my perspective, now is the perfect time to buy Baidu shares on the cheap. The company’s games in artificial intelligence (AI), cloud computing and electric vehicles (EVs) are expected to put BIDU’s shares on a path to long-term growth.
Being an internet search giant isn’t everything
Baidu is not a tech startup. It was listed on the NASDAQ since 2005. Back then, $ 27 would buy you a share of Baidu. The company is a Chinese technology powerhouse and has built its leading position with an internet search engine. Baidu is currently the second largest search engine in the world and currently controls more than 70% of the market in China.
However, the company’s competition grew up. Add the uncertainty caused by the US-China trade war and the Chinese government tougher online advertising rules, and Baidu investors have had a miserable run. In May 2019, the company announced its first quarterly loss since its IPO in 2005. At the end of the month, BIDU shares were less than half the price they were at the start of 2018.
December 2020, BIDU Stock takes off
Investors who saw their Baidu shares fall in value suddenly saw it change direction last winter. Between the last week of November and mid-February, BIDU was one of the hottest stocks in the market.
What started this 150% race? They were electric vehicles. Reports have revealed that Baidu is in talks with several companies to manufacture its own electric vehicles. Along with the enthusiasm for diversification – which would allay concerns about its struggling online advertising business – EV stocks in general were on fire. This enthusiasm led to the closing of BIDU shares at an all time high in February.
So why did the air go out? First, there was the general sell-off in tech stocks that hit the market in February. Then a series of issues including chip shortages, rising interest rates and overvaluation worries caused EV stocks to lose their luster. Since then, the BIDU action has been in the funk.
AI, cloud and electric vehicles set the stage for future growth
Despite some bitterness in EV stocks, Baidu’s EV game has real potential to pay off in the long run. The company would outsource manufacturing, but it has automotive experience since its first self-driving car project in 2013.
In addition, Baidu has made huge inroads in two areas that are entering high growth mode. The company’s AI platform is the largest in China, and Baidu operates the country’s largest public cloud computing market.
The global AI market was worth $ 62.35 billion in 2020. It is expected to reach $ 997.77 billion in 2028. This is a compound annual growth rate (CAGR) of 40.2% from 2021 to 2028.
The cloud computing market is also growing. Spending on public cloud computing totaled $ 270 billion last year, according to Gartner, but is on track to $ 397 billion in 2022.
Baidu’s big bets on these tech trends are paying off. In the fourth quarter and during the year report for 2020, Herman Yu, Chief Financial Officer of Baidu, said:
“Through years of investment in research, AI chip design, developer community, patents and talent development, we are transforming AI into innovative use cases. For example, Baidu AI cloud differentiating with AI solutions grew 67% year-over-year in the fourth quarter, reaching an annualized execution rate of $ 2.0 billion.
BIDU action is likely to bring long-term gains
the the Wall Street newspaper is followed by 37 investment analysts that cover Baidu. 30 of them have BIDU shares valued as a buy. This has hardly changed from three months ago, when it was flying high.
The BIDU share currently has a “B” rating in Portfolio filing cabinet. It might be struggling now, but with EVs, AI, and cloud computing, along with its core research and online advertising revenue businesses, this business has a future. An investment in Baidu now is very likely to pay off with strong long-term growth.
As of the publication date, neither Louis Navellier nor the InvestorPlace research staff member primarily responsible for this article held (directly or indirectly) positions in the securities mentioned in this article.
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