Baidu stock forecast: Is BIDU a buy at over one-year lows?
Investors have become overly cautious in dealing in China-based stocks as fears of last year’s crackdown by Beijing authorities on the Chinese private sector still remain fresh. Nasdaq-listed Chinese artificial intelligence (AI) and internet firm Baidu (BIDU) lost over 32% in 2021 in what was a difficult year for most Chinese firms.
In 2022, new headwinds in the form of an expected tapering of US interest rates and risk- asset aversion brought in by Russia’s invasion of Ukraine have added to Baidu stock’s price action weakness.
Has Baidu stock bottomed out? What is the Baidu stock prediction for 2022? In this article we will discuss Baidu’s latest earnings, its growth prospects and what’s in store for the stock in 2022 and beyond.
Baidu stock performance: Fall from record highs
On 8 March 2022, Baidu stock value hit an over 15-month low of $132.03 on the Nasdaq stock exchange. Baidu stock has experienced a tough start to the month as prices fell over 10% in the first eight days of March. In comparison, the benchmark Nasdaq Composite Index has lost about 7% in the same period.
After hitting an all-time high of $354.82 nearly a year ago in late February 2021, Baidu’s fortunes reversed drastically over the course of 2021. Since then, the liquidation of the infamous Archegos Capital Management, which had large positions in Baidu, a regulatory sweep across the Chinese private sector and a crackdown on foreign listing of Chinese companies weighed heavily on Baidu’s stock price.
In 2022, an expected increase in US interest rates has prompted investors to book profits from equities as an environment of free-flowing liquidity brought in by ultra-low rates looks highly unlikely to continue amid decade-high inflation. Technology stocks have seen more selling pressure than other sectors. As of 8 March close, the tech-heavy Nasdaq Composite has fallen over 19% year-to-date in 2022 compared to the broader S&P 500’s 13% fall and blue-chip Dow Jones Industrial Average’s near-11% loss in the same period.
Moreover, foreign investors have been shunning Chinese tech stocks despite their multi-year low valuations. The NASDAQ Golden Dragon China Index, which has US-listed Chinese constituents including Baidu (BIDU), Tencent (0700), Alibaba (BABA) and Xpeng (XPEV) among others, has seen five consecutive months of losses. The index has fallen over 23% year-to-date, as of 8 March 2022.
In Hong Kong, Baidu’s home-listed stock has dropped over 37% since its listing in the city last year. On the Nasdaq, BIDU stock has experienced a 6% loss year-to-date, and dropped 19% in a longer-term five-year period (as of 9 march).
Baidu stock analysis: Latest earnings
Despite the poor showing by Baidu on the stock market lately, analysts are optimistic about the company’s earnings and growth prospects. On 1 March, Baidu, also referred to as the ‘Chinese Google’, reported quarterly earnings that beat market expectations.
In the quarter ended 31 December 2021, Baidu reported a 9% year-on-year increase in total revenues to $5.19bn, about 2.7% above market consensus.
Quarterly Baidu Core total revenue rose 12% year-on-year to $4.08bn (£3.07bn), contributing over 78% of the company’s total revenue. The company includes its search engine, AI Cloud, and transport businesses under Baidu Core.
Baidu’s video streaming affiliate, iQiyi, dubbed the ‘Netflix of China’, saw quarterly revenue slip 1% year-on-year to $1.16bn.
For fiscal year 2021, Baidu’s total revenues jumped 16% year-on-year to $19.54bn. Despite reporting solid growth in its top line, the company posted a 14% drop in non-GAAP net income to $2.95bn.
The company saw expenses or cost of revenues jump over 17% in fiscal 2021 due to a rise in content costs, traffic acquisition costs and expenses related to its new AI business. Full-year cost of revenues came in at $10.09bn, representing over 51% of full-year total revenues.
Baidu stock news: Road to diversification
Baidu has been on the path of diversification. The company has forayed into new sectors, including cloud computing, artificial intelligence and autonomous driving and electric vehicles.
In its latest quarterly report, the firm said its autonomous ride-hailing service, called Apollo Go, provided over 213,000 rides in the December quarter, double the number of rides provided in the preceding quarter. The company added that it has begun charging fees to customers for its autonomous ride-hailing services in Beijing, Chongqing and Yangquan. Baidu said Apollo Go is currently available to eight cities in China.
The company’s autonomous electric vehicle joint venture, Jidu Auto, with Volvo-owner Zhejiang Geely Holding Group raised about $400m in Series A financing in the December quarter.
The company’s ACE (Autonomous Driving, Connected Road, Efficient Mobility) smart transportation, which uses a fleet of Apollo Robotaxis and Robobuses allowing users to order smart transport services on demand, has been adopted across 35 cities in China, Baidu added.
Xiaodu, a consumer electronics company that manufactures display monitors and speakers, is also a part of Baidu’s portfolio.
Baidu stock projection: Intense competition among Chinese tech
Although Baidu has taken the path of diversification, so have many of its rivals. The likes of Tencent (0700), Alibaba (BABA), Lenovo (0992) and Amazon (AMZN) are among the many offering cloud computing solutions.
Baidu is facing intense domestic competition, with the likes of Tencent’s WeChat and ByteDance’s TikTok clawing into shopping online advertisements. Tencent has also received government approval to acquire Sogou, the second-largest search engine in China, setting the tone for even fiercer competition in the future.
Kai Wang, senior equity analyst at Morningstar, said despite Baidu’s cloud offering showing sharp growth, it is expected to “face competition in the cloud from industry leaders Alibaba, Huawei and Tencent, which all have greater market share than Baidu”.
Meanwhile, autonomous driving technology, heralded as the future of mobility, has seen legacy automakers such as Toyota and Volkswagen, new-age pure electric vehicle players like Tesla and Xpeng, and technology firms like Alphabet and Intel, all foray into the sector to get an early lead on competitors.
Comparing Baidu’s stock price valuations to Chinese tech rivals, we see Baidu’s US-listed stock trading at a higher valuation to Alibaba Group. As of 9 March 2022, Baidu’s US-listed stock held a price-to-earnings ratio of 32.73 compared to Alibaba Group’s 27.06. Tencent Holding stock is currently trading at a PE ratio of 16.73.
Baidu (BIDU) stock forecast: Analysts’ view
Brokerage firm Jefferies raised its price target to $272 from $270 for Baidu’s Nasdaq-listed stock. The price target represents an upside of nearly 100% to its last close of $136.82. Jefferies maintained its buy rating for the stock.
Earlier in the year, Jefferies had picked Baidu as the sole name in the ‘AI and smart solutions’ sub-sector for its top picks for 2022.
Nomura rated Baidu stock as neutral and maintained its Baidu stock price target at $167, which represents an upside of 22% to its last close of $136.82.
Morningstar maintained its fair value estimate for Baidu’s US-listed stock at $183 in its latest report on the company. The fair value estimate represents a potential upside of nearly 33.7% to Baidu’s last close of $136.82.
Baidu share price forecast: Targets for 2022, 2025 and 2027
As of 9 March, according to the Baidu stock forecast compiled by MarketBeat, a total of 16 out of 19 analysts recommended a ‘buy’ for Baidu, two maintained a ‘hold’ rating and one gave it a ‘sell’ rating.
The analysts’ median price target for the next 12 months was $277.56, representing an upside of over 100% to its last close of $136.82.
Algorithm-based forecasting tool WalletInvestor said BIDU is a “not so good” one-year investment in its Baidu share price forecast, as of 9 March.
It expected the BIDU stock to hit $130.27 in March 2023 and move further down to an average price of about $123.13 by the end of 2023. According to its Baidu stock forecast for 2025, the stock could drop to an average price of nearly $104.43 by the end of the year.
Although the service did not provide targets for 2030, it’s five-year BIDU stock forecast suggested the stock could trade at $98.24 in March 2027.
Meanwhile, GovCapital was bullish on Baidu stock future price as of 9 March. The service expected BIDU to hit $150.42 by the end of 2022, move up to $323.82 by the end of 2023, and reach $817.85 by the end of 2025. GovCapital projected the Baidu stock could break through $1,000 and trade at $1,305 per share in March 2027.
When looking for Baidu stock projections, it’s important to bear in mind that analysts’ forecasts and price targets for the BIDU stock can be wrong. Analysts’ predictions are based on making fundamental and technical studies of the stock’s performance. However, past performance is no guarantee of future results.
It’s important to do your own research and consider the latest market trends and Baidu stock news. Always remember that your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. And you should never invest more than you can afford to lose.
FAQs
Is Baidu stock a ‘buy’, ‘sell’ or ‘hold’?
As of 9 March, according to Baidu stock price projections compiled by MarketBeat, a total of 16 out of 19 analysts recommended ‘buy’ for Baidu, two rated it as ‘hold' and one as ‘sell’.
Why has Baidu stock price been going down?
After hitting an all-time high of $354.82 in late February 2021, Baidu’s fortunes reversed drastically over the course of 2021. Since then, the liquidation of the infamous Archegos Capital Management, which had large positions in Baidu, a regulatory sweep across the Chinese private sector and a crackdown on foreign listing of Chinese companies have weighed heavily on Baidu stock price.
Is Baidu stock a good buy?
Nomura rated Baidu stock as neutral and maintained its Baidu stock price target at $167, which represents an upside of 22% to its last close of $136.82. However, analysts may be wrong and it’s important to make your own decision on whether you should hold the stock. Past performance is no guarantee of future success. And never invest money that you cannot afford to lose.
Will Baidu share price go up?
Morningstar maintained its fair value estimate for Baidu’s US-listed stock at $183 in its latest report on the company. The fair value estimate represented a potential upside of nearly 33.7% to Baidu’s last close of $136.82 (as of 8 March). Still, there are no guarantees. A stock’s performance will depend on a number of variables. That’s why it’s crucial to carry out your own analysis to form an opinion of a company’s performance and likelihood of achieving analysts’ targets.
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