There is a rare and irresistible deal with BIDU Stock today
In case you haven’t received the memo, Chinese stocks are generally in disgrace right now. Among the victims is Baidu (NASDAQ:BIDU), the popular Internet search engine in China. To put it simply, the fear of regulatory crackdown exerted negative pressure on the BIDU stock.
The biggest scapegoat to date has been the ridesharing company Didi Global (NYSE:HAVE I GOT), which Chinese regulators have targeted for a cybersecurity review.
The Cyberspace Administration of China alleged that Didi illegally collected data from its users. This is a serious accusation, and investor anxiety is understandable.
Yet this anxiety does not need to be directed at all Chinese companies and their stocks. If anything, informed investors should be cheating on their brakes right now as Baidu’s beating is an overly harsh reaction.
A closer look at BIDU’s stock
If you had asked me about BIDU stocks in February of this year, I probably would have recommended waiting for lower prices before going long.
So, now we have lower prices. Baidu bulls pushed the stock price higher to a 52-week high of $ 354.82 on February 19, but the rise was too steep and a retracement was almost inevitable.
There is a lesson to be learned here: Price hunters are punished (not always, but often). So, after peaking, BIDU stock embarked on a multi-month decline that put some unhappy investors in the red.
As of July 22, the stock price was hovering around $ 178 and most social media talk was still bearish.
But for skeptics and skeptics, I have a counter argument.
Baidu’s 12-month price-to-earnings ratio is currently 8.28. That’s absurdly low for a tech giant these days.
Frankly, some of the tech companies today don’t even have P / E ratios because they don’t have a profit. This is not the case with Baidu.
Big Beatdown on Big Data
So why all the hubbub, anyway? Why has sentiment around Chinese stocks been so negative lately?
It’s hard to know what Chinese regulators think because they are so unpredictable. At the moment, however, it seems like they just want to stand up straight and flex their muscles.
Again, the current target is Didi. The government, it seems, is considering escalating penalties from fines to expungement.
Keep in mind that the DIDI share just debuted on the stock market on June 30. Therefore, there is an existential threat to the business and the action.
In contrast, BIUD’s stock has been around for some time and is not likely to be gone anytime soon.
Certainly, Chinese big data companies could continue to feel the heat. Supposedly, the State Council said in a recent statement that it plans to tighten restrictions on cross-border data flows and security.
Always strong, in numbers
With the Chinese government flexing and attacking, it’s easy to ignore the data that shows Baidu is thriving.
The most recent tax / fundamentals data (from the first quarter) should reassure weary and suspicious investors:
- Baidu Core’s revenue totaled 20.5 billion RMB ($ 3.13 billion), up 34% year-on-year.
- Non-commercial revenues were particularly strong, at 4.2 billion RMB ($ 646 million). This represents a 70% increase year over year and is attributable to the cloud and other services.
- Online marketing revenue amounted to 16.3 billion RMB ($ 2.48 billion), showing a 27% year-over-year improvement.
- Monthly active users of the Baidu app reached 558 million, and daily logged in users exceeded 75% in March 2021.
- BJH publisher accounts grew 40% year-over-year to 4.2 million.
The next quarterly update will likely take place in August. And if those numbers are solid, skeptics will find it difficult to mount a bear case against Baidu.
The bottom line
It is not psychologically easy to buy stocks when the dominant sentiment is negative.
Yet this is how nonconformists make money.
So if you agree that the fear and doubt surrounding Baidu will go away – and that they were grossly overrated in the first place – then a long position in the stock isn’t a bad idea at all.
At the date of publication, David Moadel did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.