Baidu Inc (ADR) (NASDAQ:BIDU), a leading Chinese internet company with the world’s largest internet user population, has an interesting chart.
Take a look at the stock’s performance so far this year. It began to rally in July, consolidated throughout August and then took off on another rally that sent the shares to new highs.
Not only did BIDU hit a new 52-week high this week, but a heavy-volume move on Tuesday also sent it to record levels above the 2014 high of $251.99.
Tuesday’s volume was the best in nearly a month and it underscores the strong conviction behind the breakout.
In order to confirm the breakout, BIDU needs to hold above $252 (the black line) in the coming weeks. If it is successful, the chart will suggest higher prices and possibly even a move to $300 in the next six months.
The Road to $300 for BIDU Stock
Fundamentally, Baidu is experiencing above-average earnings growth that also backs up the call for a run to $300.
Earnings are expected to increase 24.4% in 2017 after starting the year off slow due to an issue regarding someone dying after getting advice from the company’s search engine. Advertisers pulled out and the government began an investigation, but now that all of that is said and done it appears as though BIDU can finally move beyond the tragic incident.
Earnings growth in 2018 and 2019 is expected to come in just under 30% annually, which leaves the stock trading at approximately 28X forward earnings with a PEG ratio around 1. Most U.S. tech high flyers have PEG ratios well above that of BIDU, which gives the company plenty of room to keep running.
Baidu’s combination of solid technicals, strong fundamentals and the intangible of being a leader in one of my favorite NexGen sectors — Chinese internet — makes me confident that the stock will hit $300 in the next six months. The key now is timing the right entry.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.