When it comes to Chinese tech stocks, Baidu (BIDU) is one of the most widely regarded actions. Often referred to as the “Google (GOOGL) from China ”, Baidu remains a top choice for growth-hungry technology investors seeking growth outside the United States in this area.
Indeed, Baidu has been a real growth gem for investors over the past year. A year ago, investors could buy BIDU shares for around $ 100 per share. Today that number is closer to $ 200 per share.
However, the boost is that BIDU stock rose to almost $ 340 per share earlier this year. As the technology has sold widely, BIDU stock has become very attractive at these levels. (See the analysis of Baidu shares on TipRanks)
Here are a few reasons why Baidu deserves another look from growth investors today.
Extremely attractive Business model
Going back to Baidu’s comparison with Google, Baidu’s core business as a dominant search provider in China generates a significant portion of the company’s revenue.
Baidu’s market share of 70 to 80% in the Chinese research market gives it a virtual monopoly in a hyper-growing market. With the Chinese economy set to overtake that of the United States at some point in this decade, one could argue that Baidu’s core business is much more enviable at these levels than Google’s. If the track of economic growth in China is as good as many economists predict, Baidu’s growth rate in this segment could theoretically be double that of Google for decades.
Moreover, it turns out that research is only one of many companies under Baidu’s umbrella. The company is a large conglomerate of companies ranging from AI to electric vehicles (EVs).
Baidu’s AI patent portfolio is the largest of any company in China. Additionally, its EV segment has been a source of speculative fervor as other EV inventories took off earlier this year. The company’s announced partnership with automaker Geely to enter this market has given that stock a good spin.
These catalysts are still as powerful today. One might then ask – why the massive sale? Well, there is one factor in particular to consider at this time.
Archegos margin call led to technical correction
Recent movements in Baidu stock are not 100% natural. That is, a margin call accounted for most of this security’s initial decline a few months ago.
Archegos Capital’s infamous margin call knocked down a number of Chinese stocks. It turns out that Archegos had a significant stake in companies such as Baidu. Consequently, the block sale of shares by Archegos caused the shares of these companies to fall.
Unfortunately, Baidu’s stock has not yet recovered from this mess. Equities continue their downtrend following this technical correction. It seems like the business momentum is in full swing today, and unfortunately for growth investors, the momentum works both ways.
Where to go from here?
Given the primary explanation for its sale, Baidu represents a compelling growth opportunity.
Looking back, we can see that BIDU stock is trading at 2014 levels. For a stock with this long-term growth potential, this company looks like a steal right now.
Analysts agree. the average analyst price target for BIDU stock is currently $ 351.27, implying a potential upside of 88.6%. The stock’s consensus rating is a strong buy, based on 15 buy ratings and 2 keep ratings.
Given its potential, Baidu could offer vast opportunities for investors looking for growth.
Disclosure: Chris MacDonald does not have a long or short position in Baidu stocks.
Disclaimer: The information in this document is for informational purposes only. Nothing in this article should be construed as a solicitation to buy or sell securities.