Baidu - potentially one of the best 'value' stocks on the market
Baidu has been savaged 50% in just 58 sessions and as a CFD trader I would always recommend buying strength and selling weakness, we may be looking at an inflection point in the bear move. Consider George Soros just announced a sizeable $77m purchase of Baidu, buying the weakness in several the stocks that were sold down in the Archegos blow up. If it’s good enough for Soros…..!
The consensus 12-month price target from analysts is $338.08, which given the current price suggests some 81% upside. Then, consider that of the 44 analysts who cover, 38 have a ‘buy’ recommendation, a function of the expected return. To the fundamental crowd Baidu is considered incredibly ‘cheap’ on 14.9x 2022 earnings, especially when we contrast to other large-cap internet peers, who trade largely around 30x 2022 earnings. The market clearly ascribes limited value to its equity holding of Trip.com, Baidu cloud, DuerOS, or the future of autonomous driving solution.
Will the Q1 earnings (Tuesday 18 May) prove to be a catalyst that sees price move close to the fundamental value?
We shall see, but as always, as CFD traders, we tend not to focus on long-term ‘value’ and cut our craft reacting to price action. It does play into risk vs reward assessment though, and we understand that if the bullish catalysts are there and the street are this constructive, if they hear something that resonates that it may start attracting serious capital from funds.
Baidu also have an outstanding pedigree at quarterly results having beaten estimates both on earnings and revenue in seven of the past eight quarters. I would argue that the valuation cushion, and the recent artificial sell-down suggests the barrier to rally is low.
As a short-term trade – if price can push above $190 in the near-term we may see a re-test of the $220 neckline of the head and shoulders. This would likely be driven by better earnings. Conversely, we need to respect the trend and a closing break of $176.90 would see a resumption of the bear trend, suggesting short positions for $140 – possibly $120. The head and shoulders target resides at $100.
The consensus 12-month price target from analysts is $338.08, which given the current price suggests some 81% upside. Then, consider that of the 44 analysts who cover, 38 have a ‘buy’ recommendation, a function of the expected return. To the fundamental crowd Baidu is considered incredibly ‘cheap’ on 14.9x 2022 earnings, especially when we contrast to other large-cap internet peers, who trade largely around 30x 2022 earnings. The market clearly ascribes limited value to its equity holding of Trip.com, Baidu cloud, DuerOS, or the future of autonomous driving solution.
Will the Q1 earnings (Tuesday 18 May) prove to be a catalyst that sees price move close to the fundamental value?
We shall see, but as always, as CFD traders, we tend not to focus on long-term ‘value’ and cut our craft reacting to price action. It does play into risk vs reward assessment though, and we understand that if the bullish catalysts are there and the street are this constructive, if they hear something that resonates that it may start attracting serious capital from funds.
Baidu also have an outstanding pedigree at quarterly results having beaten estimates both on earnings and revenue in seven of the past eight quarters. I would argue that the valuation cushion, and the recent artificial sell-down suggests the barrier to rally is low.
As a short-term trade – if price can push above $190 in the near-term we may see a re-test of the $220 neckline of the head and shoulders. This would likely be driven by better earnings. Conversely, we need to respect the trend and a closing break of $176.90 would see a resumption of the bear trend, suggesting short positions for $140 – possibly $120. The head and shoulders target resides at $100.