Baidu Beatdown Is Overdone, So Now’s the Time to Jump In

When the market turns against a stock, things can get really nasty. A case in point is Baidu (NASDAQ:BIDU), as the BIDU stock price in May 2021 is far off of its previous peak.

A Baidu (BIDU) sign outside a company office in Shenzhen, China.
Source: StreetVJ /

Is this because there’s actually something wrong with Baidu? Or is it an irrational selloff and a prime dip-buying opportunity for enterprising investors?

As InvestorPlace contributor Tim Biggam observes, “The majority of the recent selling was due to a massive margin call in positions taken by the over-levered Archegos Capital.”

The forced liquidation took a toll on Baidu’s investors, no doubt. Yet, now that the margin selling has subsided, it’s time for value-focused investors to take a fresh look at this bargain-priced stock.

BIDU Stock at a Glance

It appears, at first glance, that the Archegos scandal did some technical damage to BIDU stock. Or just maybe, it provided investors with a rare gift, depending on how you look at it.

On Feb. 19, 2021, BIDU stock reached a 52-week high of $354.82. Everything seemed calm and folks were confident – but that was a setup for a crisis event.

Three months later, the investing community still hasn’t rotated back into Baidu, even though the Archegos event wasn’t the company fault.

As of May 24, BIDU stock was trading at around $188, so there’s definitely room for the price to run when the turnaround occurs.

And get this: the stock’s trailing 12-month price-to-earnings ratio is an amazingly low 2.97.

Now, that’s what I would call a great value in the markets. Bargains are tough to find when the major stock-market indexes are hovering near their all-time highs.

BIDU stock could be one of those rare bargains. Now, let’s take a closer look at Baidu as a company, which is more diversified than you might think.

Leveraging the EV Angle

Some folks only think of Baidu as a Chinese search engine. The company is undoubtedly a leader in that category, but there’s more to Baidu than that.

If you go onto financial message boards, you’ll hear people talking about electric vehicle (EV) companies all day long. Yet, you’ll rarely hear Baidu mentioned in that context.

That’s unfortunate, as Baidu has the potential to create a sizable footprint in the EV sector.

Let’s not forget that in January, Baidu announced a partnership with auto manufacturer Zhejiang Geely Holding Group.

That company is known for the popular Volvo and Geely brands, and Baidu will reportedly provide intelligent driving capabilities to power the passenger vehicles within those brands.

More recently, in April, Baidu released a highly optimistic outlook for its automotive tech segment.

Specifically, within the next three to five years, Baidu expects to supply its Apollo autonomous driving system to 1 million cars.

That’s according to Li Zhenyu, senior corporate vice president at Baidu. It’s a sign that Baidu’s serious about self-driving tech – and the bears should reconsider their positions on BIDU stock.

A Quiet Beat

Apparently, investors just aren’t ready to give Baidu a break quite yet.

Baidu’s first-quarter earnings results were impressive. Regardless, BIDU stock barely budged.

Analysts, according to FactSet, expected Baidu to report quarter-adjusted earnings per share of 10.51 yuan. The company easily beat that with a result of 12.38 yuan.

Also, the analysts forecast 27.4 billion yuan in quarterly total revenues. Baidu’s actual result was better than that, at 28.1 billion yuan.

And if you’re wondering whether Baidu’s self-driving tech segment performed well, there’s no need to worry about that.

As it turned out, Baidu’s project, Apollo, had reportedly accumulated 6.2 million miles of Level 4 autonomous driving.

CEO Robin Li took the opportunity to point out Baidu’s continued success across multiple segments:

“We are delighted to bring innovation across many sectors, including marketing cloud, enterprise cloud, smart transportation, autonomous driving, smart assistant and AI chip, through our decade-long investment in AI.”

The Takeaway

If you pay too much attention to the Archegos incident, you might end up in the bear camp when it comes to BIDU stock.

But if you only pay attention to the facts that directly pertain to the company, then you can find many reasons to feel good about owning Baidu shares now.

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.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation

Article printed from InvestorPlace Media,

©2021 InvestorPlace Media, LLC