Top Reasons to Like BIDU Stock
In the period of a month, Baidu Inc (ADR) (NASDAQ:BIDU) stock has risen from $140.00 to $176.50. As it happens, Baidu stock should easily reach $200.00 again.
Analysts at such institutions as Credit Suisse or Jefferies have price targets well above $200.00—they range from $219.00 to $240.00. The Chinese market volatility no doubt scarred those who bought it in 2015, but Baidu stock has shown resilience. Baidu can count on as much as $11.0 billion in cash, which it can use to grow or even to buy back its own shares.
Baidu is the fourth-largest domain in the world, falling just behind Google, Facebook, and YouTube. (Source: Alexa.com, last accessed March 9, 2016.) That’s enough reason for anyone not to underrate Baidu’s strength.
The company has seen a spike in marketing and advertising revenues on the mobile platform. This alone accounts for half of the company’s revenue. However, Baidu’s main asset is the Chinese market itself.
The important consideration about slower Chinese economic growth is not gross domestic product (GDP). It is the shift in the country’s economic growth model. After rapid industrialization and manufacturing, China is now developing services and higher salaries. There has been a marked increase in domestic demand. That’s what has kept China’s growth rate high compared to the rest of the world. There has been an increase of domestic consumption. Services have multiplied in turn and this economic recalibration is what makes Baidu such an interesting growth proposition.
Baidu is one of the signs of progress in China; it belongs in the same ranks as Alibaba, Lenovo, and Xiaomi. Baidu will grow just as China’s transformation is stimulating more internal consumption. Not surprisingly, Baidu is one of the three major Chinese Internet companies (the other two are Alibaba and Tencent) dominating the market for programmatic advertising solutions.
“Programmatic advertising” is an online marketing term. It refers to real-time buying and selling via user-driven advertising and it is becoming increasingly popular. Programmatic ads in China are expected to rise 48% to $9.3 billion, representing 50% of all display ads. (Source: “Alibaba, Baidu, Tencent Dominate China Programmatic Ads,” Bloomberg, March 9, 2016.)
Baidu enjoys an 80% share in the Chinese search engine market. It benefits from the fact that China restricts such search engines as Google. But, it is not resting in the comfort of this blockade. Baidu envisages a future where Google will have greater access to Chinese users. Therefore, Baidu is defending its market share by ensuring a more genuine loyalty.
To do so, Baidu wants to retain users even when they travel to other countries, where it competes with Google. (Source: “How Baidu Is Strategizing To Retain Its Key Users,” Forbes, March 7, 2016.) This apparent defensive move is also a growth effort, because the retaining techniques can also serve to attract more users in other countries. In other words, Baidu is shaping up to compete against Google itself—even if gradually.
Baidu claimed having 657 million monthly active users from mobile searches in December, 21% higher than last year. And Baidu is expanding at a breakneck pace. In 2015, Baidu made significant progress in expanding its online marketing platform and further expanded transaction services.
Baidu is not just a simple search engine; the company offers its users 57 apps, from community affairs to e-commerce. It runs an online Wikipedia-style service and, if that weren’t enough, it is also exploring artificial intelligence, smart cars (it could acquire Nokia Maps), and a system similar to Uber. Baidu is not just competing against Google; its very model is Google.