Baidu Inc (ADR) (NASDAQ: BIDU) is one of those major Chinese internet companies that is always compared to a similar U.S. counterpart, whether it’s accurate or not. In BIDU stock’s case, it is called the ‘Google of China’.
While that’s relatively accurate, just like Alphabet Inc (NASDAQ: GOOGL) has become a diverse powerhouse due to the revenue generated by its search engine, it’s also similarly deceiving.
The Chinese internet is set up differently because the government regulates it differently that the U.S. regulates its online companies. In fact, the Chinese government usually has a police officer in the big internet companies, making sure laws are being enforced.
The hype of BIDU stock has been around as long as the hype for all of China’s big internet stocks has been around. And the comparisons to major U.S. players only helped foster that ‘ground floor’ opportunity excitement.
Of course, that means there is plenty of speculation. The stocks run up beyond what’s realistic and then the short sellers come in, the stock crashes and the game repeats itself.
And once again, we’re at the point where BIDU stock has a huge amount of ‘short interest’ (BIDU stock owned by short sellers) in the stock once again. It also didn’t help that its COO, who has been with the company for about a year, has announced he is stepping down.
This doesn’t inspire optimism from market professionals.
The Future for BIDU
But BIDU has been doing a lot of things right recently, especially from the context of U.S. companies.
Typically, Chinese firms add more and more businesses to their core business. In BIDU’s case it was a lot of mobile apps and gaming services. It also added a streaming business, iQiyi, which of course is now known as the Netflix Inc (NASDAQ: NFLX) of China.
It also has been very active in developing artificial intelligence tools and autonomous driving.
But BIDU is showing that it can also focus. It has sold off some of its mobile apps and gaming to focus on building out its mobile search engine with an AI upgrade. And the results are very promising.
BIDU spun off iQiyi Inc (ADR) (NASDAQ: IQ), in March. After the spin off it launched on the U.S. exchange. It’s still operating at a loss as it begins to buy and develop content, but its potential growth path is encouraging, especially given the support of its parent company.
And if BIDU can do for mobile search what it has done for desktop search in China, that will mean a strong revenue stream moving forward.
The Bottom Line for BIDU Stock
BIDU stock is up 40% in the past 12 months, but only 12% year to date. And its Q1 numbers were very bullish. There’s an opportunity to get in cheap, if you act fast.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
