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Baidu Stock: Web Service Showing Promise

Posted On August 18, 2017 3:48 pm
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the front of the Baidu Headquarters building in China

Last month Baidu Inc (ADR)(NASDAQ:BIDU) posted stellar second quarter results, reporting profit growth for the first time in three months. The results show that the company has come out of the medical searches scandal that dented its reputation, and traffic pretty significantly. Baidu Inc  (ADR)(NASDAQ:BIDU) is betting big on lucrative catalysts like AI, autonomous driving, and mobile. In the second quarter, Baidu stock increased by a whopping 83% profit increase to $655 million.

Baidu Inc  (ADR)(NASDAQ:BIDU) had suffered due to its declining ads revenue after Chinese authorities ordered the company to remodel, and change its search and ads practices last year. As a result, Baidu’s search engine business profits decline by 67% in fiscal 2016. But, the storm has now weathered and things are back to normal.

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Baidu Inc  (ADR)(NASDAQ:BIDU) enjoys dominance in the search engine market in China. After Google big farewell to the Chinese market in 2010, there is no company to challenge Baidu’s market penetration. There are still over 49% Chinese population, which has no access to the Internet. China’s government is taking several steps to bring its population online.

As a result, Baidu’s search engine business has strong chances of growth. Baidu has over 80% search engine market share in China. The search engine ads market worth in China is expected to growth to $54.99 billion. Imagine the scale of opportunities Baidu stock has at its disposal.

A China Search Engine Market Share Chart

 

Baidu Inc  (ADR)(NASDAQ:BIDU) has invested in a plethora of business ventures in China. These investments have affected the margins, but analysts think that the company will soon start bearing the fruit. For example, Baidu’s investment in Chinese online travel company Qunar has bright growth prospects after Qunar’s merger with Ctrip. The new entity is now a leading travel company in China, and Baidu has a 25% stake in the company.

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Similarly, Baidu Inc (ADR) (NASDAQ:BIDU) has a huge investment in iQiyi, which is known as Netflix of China. iQiyi recently struck deal with Netflix after which the company will be the only distributor of Netflix content in China.  Baidu has an 80.5% stake in iQiyi. The worth of this stake will soon cross $9 billion.

Baidu Inc  (ADR)(NASDAQ:BIDU) also has several other lucrative investments in various areas including takeout delivery and Uber China.

Baidu Inc  (ADR)(NASDAQ:BIDU)’s most important bet is on AI. The company’s CEO Robin Li recently made very important statements about the future of AI. He said that we will soon bid farewell to the era of PCs and mobile internet, and welcome the innovative era of AI. Baidu recently signed a deal with NVidia which is focused on AI platforms for self-driving cars.

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Baidu and Microsoft also entered into an agreement regarding self-driving cars in July. Baidu Inc  (ADR)(NASDAQ:BIDU)’s deep learning platform Baidu Brain is also getting a lot of fame. Autonomous cars business will be one of the biggest growth drivers for Baidu in the near future.

According to an estimate by Business Insider Intelligence, there will be over 10 million driverless cars on the roads by 2020. Similarly, IEEE estimates that 75% of cars in 2040 will be autonomous.

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