Baidu Inc (BIDU): Buy on the Current Weakness and Strong Future Catalysts


Baidu Inc (NASDAQ: BIDU) is one of the hottest tech stocks in the market. The company deals in all the areas where growth is expected to come worldwide: artificial intelligence, search, video, autonomous driving, and e-commerce. For the fourth quarter of 2018, Baidu’s revenue rose by 22%. However, Baidu stock is under pressure amid an economic slowdown in China. Baidu is also facing problems in its search business. The company’s operating profit was cut by more than half on a reported and adjusted basis in the fourth quarter. However, we believe that now is the right time to buy Baidu on weakness.

Growth concerns around the search business of Baidu Inc (NASDAQ: BIDU) are unfounded. Irrespective of the economic conditions of China, the company remains the leader of the search market. Baidu captures about two-thirds of China’s search market. Over the last few years, the company has managed to turn the tables against its opponents in the mobile search market. It now accounts for 71.82% share of the mobile search market, according to traffic tracker StatCounter GlobalStats.

Baidu’s fundamentals also remain strong. As of the start of 2019, the company has a whopping $18.7 billion in cash on its balance sheet.

Autonomous Driving

The most significant catalyst for Baidu stock is the company’s efforts in the autonomous driving industry. Baidu’s Project Apollo, which was launched in 2017, is already testing autonomous cars in China. In November last year, Baidu surprised the market by partnering with Volvo Cars to develop and mass produce self-driving electric vehicles in China. Volvo will offer its expertise in auto manufacturing, while Baidu will install its autonomous driving platform Apollo in the cars.

Voice Assistants

Baidu Inc (NASDAQ: BIDU) is also betting big on the voice assistants market to take on giants like Google and Amazon. The company’s DuerOS voice assistant is currently installed in over 150 million devices, having about 35 million users. DuerOS has an open-source SDK and API, which helps vendors use the system in their devices. This technique improves the expansion of Baidu’s footprint.

Smart Speakers

Smart speakers is another strong and short-term catalyst for Baidu stock. Leo Sun of The Motley Fool said in a program on CNBC that Baidu is the fastest growing smart speaker company in China, beating Alibaba and Xiaomi. The analyst thinks that Baidu’s efforts in AI are tremendous, but they will take a lot of time to affect net income and revenue growth.

Artificial Intelligence

Baidu Inc (NASDAQ: BIDU)’s opportunities in Artificial Intelligence are huge. Jason Zhou of Guotai Junan Securities recently said in a program on CNBC that Baidu’s net income declined heavily in the fourth quarter mainly due to the company’s significant investments in Artificial Intelligence. He thinks that these investments will pay off in the future.

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Also Read: Baidu Inc (NASDAQ: BIDU) and Xiaomi Join Forces to Work on Artificial Intelligence and the Internet of Things

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