BIDU Stock Technical Analysis
Baidu undercut the April 2013 low of 82.98 in the pandemic-hit first quarter. Shares have rallied strongly since, holding above the 10-week line after finding support at that level in late November, according to MarketSmith chart analysis. They are still well off May 2018 highs.
Currently, BIDU stock is extended from a 35.54 cup-with-handle buy point cleared in mid-October. That means shares are not in buy range from the latest breakout; in fact, they are in the profit-taking sell territory.
However, Baidu stock is consolidating tightly after a big vertical move. That could create a new buying opportunity in the near future.
The IBD Stock Checkup shows that Baidu earns a Composite Rating of 95 out of 99. The Composite Rating combines key fundamental and technical metrics in a single score. Investors in top growth stocks should generally look for a CR of 95 or higher.
The KraneShares CSI China Internet ETF (KWEB) holds Baidu, Alibaba (BABA) and Tencent (TCEHY). The three are collectively known as China’s BAT stocks. Alibaba is on the IBD Long-Term Leaders list, but is selling off sharply as regulators launch an anti-monopoly probe.
Baidu has a Relative Strength Rating of 85, above the 80 or higher benchmark you’d want to see. Meanwhile, the relative strength line has rallied to a 19-month high after a long slide. The RS line is the blue line in the chart shown. It reflects weakness vs. the S&P 500 when it’s trending down.
An Accumulation/Distribution Rating of A, on a scale of A+ to E, signals institutions have been strong buyers of BIDU stock in the past 13 weeks.
Baidu is a well-traded stock, with strong institutional backing. At the end of September, 1,364 funds owned BIDU stock, down from 1,366 in June. Ten analysts rate Baidu stock a buy, one has a hold and none has a sell, according to Zacks Investment Research.
Baidu Earnings And Fundamental Analysis
On key earnings and sales metrics, BIDU stock earns an EPS Rating of 91 out of 99, and an SMR Rating of B, on a scale of A-E. The EPS rating scores a company’s earnings growth vs. other stocks, and the SMR rating measures it on sales growth, profit margins and return on equity.
Baidu has a solid earnings history and led the explosive rise of China internet stocks a decade ago. But earnings have been volatile in recent quarters.
In November, the Chinese internet search giant reported EPS of $3 for its third quarter, crushing views for $1.85. Revenue growth turned positive after two down quarters, “with many advertising verticals turning around, putting Baidu in a good position to further benefit from a recovery in the Chinese economy,” the company said.
Simultaneously, Baidu announced it would buy the China-based livestreaming operations of Joyy (YY) for $3.6 billion in cash. “This transaction will catapult Baidu into a leading platform for live streaming and diversify our revenue source,” CEO Robin Li said in a statement.
Baidu made its name in online search and maps. Over the last few years, the so-called Google of China built out a vast ecosystem of mobile apps and AI-driven businesses, to grow its non-advertising revenue. Baidu also made its mobile ecosystem a priority, aiming for in-app search to grow faster and more profitably than browser search.
Baidu stock got a boost in mid-December on reports that the internet giant was looking to team up with a local automaker on electric cars, though that hasn’t been confirmed. Baidu has been working on self-driving technology for some time.
When Baidu next reports, analysts expect its earnings to plunge 39% to $2.33 a share, per Zacks, reflecting tougher year-earlier comparisons. They see Baidu EPS growing 10% in all of 2020, then jumping 21.7% in 2021.
Baidu’s revenue is likely to grow 7% in Q4. Analysts forecast a 0.9% sales gain for all of 2020, and a further 15.4% increase in 2021. Over the past three years, Baidu earnings averaged 1% growth with sales up 7%.
In 2016, Chinese authorities imposed new rules defining “paid search results” as a form of internet advertising. Those regulations weighed on Baidu’s online marketing revenue.
Baidu Stock Basics
Baidu controls nearly 75% of search traffic in the world’s biggest internet market. The company generates 80% of its total revenue from online marketing services, mostly from advertisements.
Many Chinese internet stocks had a rough Q1 due to the pandemic, after a choppy 2019 as hopes rose and ebbed for a U.S.-China trade deal.
Companies in China cut back on online advertising due to stricter government regulation. Baidu also spent aggressively to pursue new growth opportunities. Some investments haven’t panned out, while others — such as driverless cars — are yet unproven. That all affects earnings, and thus BIDU stock.
On Dec. 13, China fined Alibaba and a Tencent unit under anti-monopoly laws. In November, a Chinese regulator released draft rules defining anti-competitive behavior for the first time. It was broadly seen aimed at the country’s technology giants including Baidu. The country is also concerned about data use and privacy.
In Q3, Baidu’s core businesses grew revenue 2%, while iQiyi revenue fell 3%. Seen as the Netflix (NFLX) of China, Baidu’s majority iQiyi business had 104.8 million subscribers as of September. But it’s a lower-margin business requiring costly investments to fend off Tencent Video, Alibaba’s Youku Tudou and other rivals.
The flagship Baidu app averaged 206 million daily active users users (“DAUs”) and 544 million monthly active users (“MAUs”) in September. The app combines search and news feeds.
Meanwhile, Baidu’s new AI initiatives include DuerOS, a voice assistant for smart speakers, smart displays and smartphones. They also include Apollo, an open-source platform for self-driving cars, and Baidu Cloud, which offers tools for call centers and other enterprises.
Baidu’s new AI businesses saw healthy growth in Q3.
The DuerOS voice assistant reached 2.7 billion first-party monthly voice queries, up 65% year over year. Baidu deployed its Apollo robotaxis in Beijing, the third city in which it will operate. Baidu’s AI open platform, built on Baidu Cloud, has attracted more than 2 million developers.
Morgan Stanley expects the Chinese e-commerce market to grow by 18% in 2020, as it expands from consumers to businesses and governments.
Baidu Weighs The Coronavirus Pandemic
Amid the coronavirus pandemic, Baidu is focused on profitable growth and disciplined spending.
But Baidu’s Q4 revenue guidance of -1% to 8% reflects “substantial uncertainty” ahead. If the economy sours, businesses that pay to place advertisements at the top of Baidu’s search results are likely to slash ad budgets.
In Q3, China’s GDP grew 4.9% as its economic recovery continues, a favorable sign for BIDU. Moreover, the pandemic could open up new opportunities. Spurred by the government, Baidu, Alibaba and Tencent are all working on health technologies to diagnose cases and find a vaccine.
Nearly 2,000 hospitals across the country use Baidu AI for public health monitoring, drug development and disease diagnosis.
Baidu Stock Peers
BIDU stock ranks No. 9 out of 63 stocks in IBD’s Internet-Content group. The group itself ranks No. 18 out of 197 industry groups, and continues to act well.
Facebook stock is on the IBD 50 list of top growth stocks to watch and buy.
Among Chinese internet giants, Alibaba, Tencent and JD.com (JD) all show much-stronger projected growth than Baidu for quite some time, especially on the revenue side.
Is BIDU Stock A Buy Now?
Baidu is a quality stock in a leading industry group. Wall Street expects Baidu earnings to rebound in 2020 despite the coronavirus hit early this year. The company’s likely to see even stronger earnings and revenue growth in 2021, far ahead of the pace Baidu averaged in the last three years.
However, Baidu lags several online giants both at home and abroad, including Alibaba, Tencent and Facebook. Investors should focus on top stocks in leading industry groups for the best shot at superior returns.
Technically, BIDU stock is far extended from its most recent breakout. It also remains well below all-time highs, though its RS line is improving.
Bottom line: Baidu stock is not a buy right now. Investors could buy it on a pullback to key support levels or if shares form a new base. For now, it’s best kept on your investing watchlist up to date.
Besides, there are several other top-rated large-cap stocks to buy or at least watch right now.
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