BIDU Stock: This Could Send Baidu Inc Skyrocketing

BIDU StockWhat to Expect from Baidu Stock?

Baidu Inc (ADR) (NASDAQ:BIDU) is expected to report its fourth-quarter results tonight. I have reason to believe that BIDU stock may have a good chance to make a neat upward run following the call.

Fears of a Chinese economic slowdown have primarily hammered Baidu stock since the beginning of this year. The two back-to-back Chinese crashes—one in the summer of 2015 and the other at the beginning of this year—have had investors worried. But indicators suggest these fears may have been blown out of proportion.

China’s strong consumer spending data have served the biggest reassurance. Chinese consumers have spent 31% more this Chinese New Year than they did in 2015. In fact, Chinese spending has hit record levels beginning this year. (Source: “Chinese Consumer Spending Hits Record During Holiday,” Bloomberg, February 17, 2016.)

Naturally, the gloomy outlook being projected by the mainstream is not entirely correct. Now, it’s worth noting here that the industry where most of this spending is being directed is travel. (Source: “What Slowdown? Chinese Travel Boomed Last Year,” Fortune, February 23, 2016.)

And guess who owns the top travel web sites in China? That’s right: Baidu!

Baidu owns China’s biggest travel web site, Qunar, and also holds stakes in Qunar’s next biggest competitor, Ctrip. These stakes contribute to Baidu’s transaction services segment, which brings in nearly half of Baidu’s revenue. In the last quarter alone, this segment posted stellar triple-digit year-over-year growth of 119%.

Rest assured that the strong spending in this industry means Baidu will continue to reap the benefits from this segment.

Secondly, let’s also not forget that this search engine giant has a business model comparable to Alphabet Inc (NASDAQ:GOOG). It is for a reason that Baidu is often referred to as “China’s Google.”

Initially starting as a search engine, Baidu has grown into a full-blown technology and Internet services company. Its economic moat lies in its O2O (online-to-offline) business. Through its O2O ecosystem, Baidu allows the Chinese to look up products and services online that are then sold or delivered to them offline.

Take, for instance, “Baidu Takeout,” a food delivery service that has been a massive hit in the country. Likewise, Baidu’s investments in the group-buying web site Nuomi and the taxi-hailing service Uber are two other examples of how Baidu is making the most out of this O2O business.

And that’s not all.

Following in the footsteps of Google, Baidu is also investing in driverless technology, with goals to bring it to China before Google does.

At the same time, it has also partnered with one of China’s biggest banks, Citic Bank, to invest in mobile financial services. “Baidu Wallet” (pay attention to its resemblance to “Google Wallet”) has already raked in 45 million user accounts.

It’s interesting to note here that the company has been aggressively spending on both promotional advertising and technological research and development (R&D) to stay ahead of the game.

The Bottom Line on BIDU Stock

Baidu is the second-biggest Internet services company (after Alibaba) in the second-biggest economy in the world. This company virtually controls all of the search traffic of the most populous country globally. In other words, it earns most of the ad dollars generated in China.

At the same time, it is expanding its stronghold over other areas of the Internet. Its O2O business is particularly its most clever way of making money.

BIDU stock got pummeled this year after bearish sentiments clouded the Chinese market. But Baidu is growing stronger each passing day. It’s only a matter of time now before investors start seeing the strong fundamentals that are playing out in favor of Baidu. And when that happens, BIDU stock could once again skyrocket beyond the $200.00 mark.