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Baidu: After 65% Plunge, It's Time To Buy This Chinese Tech Giant

By Investing.com (Jesse Cohen/Investing.com)Stock MarketsMay 20, 2022 03:23PM ET
www.investing.com/analysis/baidu-after-65-plunge-its-time-to-buy-this-chinese-tech-giant-200624588
Baidu: After 65% Plunge, It's Time To Buy This Chinese Tech Giant
By Investing.com (Jesse Cohen/Investing.com)   |  May 20, 2022 03:23PM ET
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Shares of Chinese technology companies have been some of the market's worst performers over the past year. Investors dumped the country's tech mega-caps after Beijing began a broad regulatory crackdown aimed at reining the sector in early 2021.

At one point, more than $1 trillion of the combined market value of China's biggest tech companies, including Alibaba (NYSE:BABA), Tencent (HK:0700), and JD.com (NASDAQ:JD), was wiped out amid worries over the damaging impact of the year-long campaign.

Indeed, the KraneShares CSI China Internet ETF (NYSE:KWEB), which tracks a basket of China-based companies focused on internet and internet-related technology, has tumbled approximately 73% since reaching an all-time high of $104.94 in February 2021.

KWEB Monthly Chart
KWEB Monthly Chart

Despite the selloff, shares of China's tech behemoths could be poised for a strong recovery as the worst of President Xi Jinping's anti-tech regulatory clamp-down appears to be over for the time being.

The latest signal came earlier this week when China's top economic official, Vice Premier Liu He, said Beijing would support the development of digital economy companies and their public listings.

It was an unusually public show of support for the once-freewheeling sector as the ruling Communist Party seeks to boost the economy in the face of slowing growth due to the ongoing COVID-19 pandemic.

Baidu: Poised For Rebound

Against this backdrop, Baidu (NASDAQ:BIDU) emerges as a solid buy as investors assess receding risks and uncertainty related to the regulatory crackdown.

Shares in the Chinese language internet provider now stand roughly 65% below the record peak of $354.82, reached in February 2021, and 23.3% above the 52-week low of $101.62, recorded May 12. BIDU closed Thursday at $125.34.

BIDU Weekly Chart
BIDU Weekly Chart

At current levels, Baidu has a valuation of $41.07 billion, making it the fifth-largest tech company in China in terms of market cap.

With a fair value of $186.51 per share, the quantitative models in InvestingPro point to a 48.8% upside in Baidu stock over the next 12 months.

BIDU Fair Value Estimate
BIDU Fair Value Estimate

As Pro+ points out, Baidu is in good financial health, earning a score of 3 out of 5, thanks to a combination of solid cash flows and its profit and growth prospects.

BIDU Financial Health

Pro+ calls out a few more key insights on the stock, with the point of it holding more cash than debt on its balance sheet standing out the most:

BIDU Company Profile
BIDU Company Profile

Baidu Earnings Estimates

The Beijing-based company—which has topped Wall Street's expectations for earnings and revenue for 11 consecutive quarters dating back to Q2 2019—is slated to report its latest financial results before the U.S. market opens on Thursday, May 26.

Consensus estimates call for the tech giant to announce earnings per share of RMB5.09 ($0.76), falling 58% from EPS of RMB12.38 ($1.84) in the year-ago period. Revenue should dip 1% Y-o-Y to RMB27.92 billion ($4.16 billion).

Beyond the top-and bottom-line numbers, investors will be eager to hear commentary from Baidu CEO Robin Li regarding the outlook for the months ahead as the tech giant further aligns itself with the priorities of China President Xi Jinping.

Baidu: After 65% Plunge, It's Time To Buy This Chinese Tech Giant
 

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Baidu: After 65% Plunge, It's Time To Buy This Chinese Tech Giant

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Comments (12)
Nick Passarella
Nick Passarella May 21, 2022 12:09PM ET
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Got you all beat! Still holding CWEB!
Chris Maz
ChristoM May 21, 2022 12:05PM ET
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110% risk off all CCP stocks.   Especially now with the CCP urging divestment of western assets per the WSJ article.
Raj Shan
Raj Shan May 21, 2022 8:58AM ET
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Yeah, interesting analysis… 👍
Ethan Strong
Ethan Strong May 20, 2022 8:57PM ET
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Nope! Not buying anything Chinese accept Chinese food
Joseph Obrzut
jzut May 20, 2022 5:20PM ET
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If I nibble on anything it's gonna be US stocks and QLD and SSO. Enough trouble in our market. Don't need Chinese problems.
Francesco Lucchesi
Francesco Lucchesi May 20, 2022 1:16PM ET
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wait for -95% First then buy
Brian Anderson
Brian Anderson May 20, 2022 11:55AM ET
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Never doing Chinese stocks again due to its gov’t interference.
ZS Beck
ZS Beck May 20, 2022 11:55AM ET
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I agree. I hope all will get delisted.
Erikke Evans
Erikke May 20, 2022 11:36AM ET
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It will be time to buy when the trend reverses and not one second before... unless of course you enjoy being a value investing bag holder.
Steven Kilgore
Steven Kilgore May 20, 2022 10:16AM ET
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The pick may have great upside but the truth of the matter is the CCP can and usually does mess with every successful/big company in China. If you invest in any Chinese company you have to accept the fact going in that at any moment the stock could drop 20-40% at the political whims of the CCP.
Leo Correia
Leo Correia May 20, 2022 9:01AM ET
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wondering how much uncle Pooh payed this guy to write this piece...
 
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