Is Baidu Stock A Good Buy? 

Is Baidu Stock A Good Buy? The stock markets are more volatile than a teenager having a temper tantrum right now. The never-ending pandemic, another possible recession, and the GameStop controversy have seen stocks drop and pop and drop again.

You’d think investing in tech stocks — during a year when everyone’s at home using tech — is a good bet. But it’s not as simple as that.

High-priced tech stocks have sunk to bear market territory, and even Tesla (TSLA), the holy grail of tech at this very moment, has seen its price tumble this month.  

Things are a little shaky.

But there’s not a stock slump for all companies. Baidu, the Beijing-based Google alternative and one of the world’s biggest tech brands, saw its stock jump an enormous 20.6 percent, bucking the global trend. 

So is Baidu stock a buy? Or a dangerous gamble?

Baidu Owns 80% Of Chinese Search Market

Baidu is a Chinese technology brand that specializes in internet services. It is most famous for its search engine, which dominates the Chinese internet space.

Think Google. Well, Almost. Google dominates 92 percent of the world’s search market, while Baidu commands 80 percent of China’s market.

If Google (GOOG) is a global powerhouse, Baidu (BIDU) is a local phenomenon. But with 222 million daily active users and serving four-fifths of internet users in the world’s most populous country, being a local phenomenon is nothing to sniff at. 

Part of the reason Baidu has exploded in its homeland is that the Chinese government has blocked Google. So the “Big G” can’t offer its search to internet users in the world’s biggest market.

And because there are concerns about Baidu censoring information on the internet, the company has struggled to become a dominant force outside its borders. 

Until recently.

Following months-long talks, the Trump administration and State Department agreed not to ban American investments in Baidu — a development that sent its stock price through the roof.

What happens next is anyone’s guess, but the Chinese tech giant might expand its internet services overseas. Still, it’s unlikely to overtake Google as the world’s No.1 search engine.

What you need to know: Baidu is 10 times more popular in China than its biggest competitor, and like Google in the West, it has had a significant impact on culture by shaping how people search for products, services, and information online.

Also, like Google, Badiu commands almost every aspect of the internet search sphere, offering services for maps, apps, news, translations, and internet advertising. 

Where did it all start? In 1994, when software engineer Robin Li experimented with search engine algorithms. He developed an algorithm that ranked web pages a couple of years later, moved to Beijing in 1999, and the rest is history.

Is Baidu Stock A Buy?

Baidu (NASDAQ: BIDU) has posted modest gains on the American stock market in recent years. But its fortunes changed after reporting healthy numbers for 2020 Q4 with adjusted earnings of $3.08 per share. Its revenue? An impressive, but not surprising, $4.64 billion. (Most analysts predicted a similar amount.) 

What’s exciting is the future? As global stock markets continue on a rollercoaster, investors want high potential, but predictable technology stocks. Baidu, in particular, looks like a promising bet because of relaxed investment rules in the U.S. and its expansion into the electric vehicle (EV) and artificial intelligence (AI) spaces. 

EV and AI are driving Baidu stock prices in the U.S. It’s likely too late for the Chinese company to break into the internet search space, which Google continues to squeeze. But there is enthusiasm for Baidu’s technology expansion, with its EV endeavors creating the most buzz. 

Although the markets remain unstable, Baidu stock remains a good buy for tech investors. Still, there are concerns.

Risks Of Buying Baidu Stock

Though Baidu promises a healthy outlook, problems persist.

Unlikely to break into the internet space outside of China because of Google’s dominance (and the aforementioned censorship concerns), Western investors seek out Baidu stock because of potential success in the international EV and AI markets. And it’s too early to predict the success of these experiments at this point.

There are also worries about Baidu’s performance back home. In 2020 Q4, the company generated 68 percent of total revenue from online marketing services — down from 72 percent in 2019 Q4. 

“This core business mainly sells ads on its search engine, portal sites, and other apps,” notes NASDAQ. 

Is this drop in Baidu’s primary revenue stream a sign of things to come?

Can Baidu Competitors Win?

Google, Baidu’s all-American rival, continues to post numbers that agitate all its competitors, boasting better stock performance than both Apple (AAPL) and Facebook (FB).  

But with investors intrigued by Baidu’s EV and AI initiatives, it might be a better idea to compare the Chinese super-brand with Tesla (TSLA). Elon Musk’s EV and clean energy company posted surprisingly positive numbers recently, making the latter arguably the safer bet for investors wanting “green” exposure.

Is Baidu Stock A Buy? The Bottom Line

There are risks with buying any tech stock (and any stock) in 2021, but Baidu’s recent postings are impressive. However, they are not spectacular.

It’s too early to determine whether the company will succeed in the EV and AI sectors, and concerns over the revenue drop from online marketing services, its core business, remain.

Investors should weigh up the pros and cons before they ask, “Is Badiu stock a buy or a gamble?” From a valuation perspective the answer is clear. The fair market price for BIDU share price is $344, which leaves a lot of room for upside growth.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.