Baidu (NASDAQ:BIDU) saw its shares surge to an all-time high of $354.82 in February. It then saw that share price collapse over the next two months. At this point, BIDU stock is trading around $207, down nearly 42% from its lofty February heights.
What has been going on in 2021 to cause such extreme movement in BIDU stock? And at its current price — which is lower than it was to kick off 2021 — is the stock an investment you should be considering? Or is this an unfolding disaster that’s best to stay well away from?
I don’t think there’s any reason for current Baidu shareholders to panic. If anything, the current price makes BIDU stock a very interesting investment prospect. Here’s my rationale for this assessment.
Why BIDU Spiked in February
Baidu is a Chinese tech company with a considerable history — it’s been publicly traded in the U.S. since 2005. This is an established company with a proven business model, not a startup. Baidu is considered one of China’s internet giants, with a strong position in areas like online search, cloud computing, online mapping and mobile apps. It is also an AI leader, with the largest number of artificial intelligence (AI) patents of any Chinese company.
However, the reason for the big spike in BIDU stock earlier this year was for something entirely different. On Jan. 10, Baidu announced it is entering the red-hot electric vehicle (EV) market. It is partnering with multinational EV-maker Geely, best known to Americans as the owner of Volvo. Baidu (which owns 283 autonomous driving patents) will provide the driving technology, while Geely handles the design and manufacturing.
Baidu was already a company with a leading role in many areas that are seeing high growth. Adding electric cars to the mix was enough to help propel BIDU stock to a 55% gain over the next five weeks.
Why the Stock Has Fallen
Given the enthusiasm over Baidu’s entry into the EV market, what happened to deflate BIDU stock so quickly?
A combination of factors is responsible. Starting in February, we began to see a broad selloff of tech stocks, and Baidu was caught up in that.
There are additional issues in play that have spooked investors that are more specific to Baidu. As a Chinese company listed on an American exchange, Baidu could eventually face delisting. It is seeing growing competition for advertising revenue from increasingly popular Chinese social media apps like TikTok. In addition, the Chinese government continues to ramp up pressure on tech and internet companies, with threats of increased regulation.
Combined, these factors were enough to chill investors and reverse the gains BIDU stock made after its EV announcement.
The Bottom Line on BIDU Stock
How do other analysts feel about Baidu stock? Am I the only one who feels the punishment the market has inflicted on BIDU is overreaction? Hardly.
I checked in with CNN Money, which polled 38 investment analysts who are covering the company. They rate BIDU stock as a consensus “Buy.” In fact, 30 of the 38 are in the “Buy” camp, with two rating BIDU as “Outperform.” Their median 12-month price target of $355.89 offers nearly 72% upside.
There is a lone holdout with a “Sell” rating, and the lowest price target of $198.71 has just 4% downside. Clearly, this group agrees that Baidu is a company with a future, with shares that are currently undervalued and positioned for growth.
Time to circle back to the question: Is BIDU stock a buy? There are risks that could adversely impact the company, ranging from the threat of delisting to increased Chinese government regulation. These concerns contribute to Baidu’s “B” rating in Portfolio Grader.
However, if you look beyond the risks — which are far from certain — the picture is pretty attractive. The biggest internet search and AI player in China, and a new entrant in the rapidly expanding EV market, with stock at a 42% discount compared to its mid-February high?
That’s a tough one to pass up.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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