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The star of the week was again Baidu (BIDU) which muscled past the other internet giants to climb another 9.7 percent, adding on to its 15.9 percent jump the previous week. The Chinese search engine leader has been basking in newfound investor love as the next EV-maker wannabe.
The stock received further boosts from a strong Q4 2020 profit and the company placated investors for the revenue miss with an upside sales forecast. The management also shrewdly provided the soundbites during the earnings conference call that analysts were clamoring for in justifying higher price targets for the stock.
For instance, they emphasized the progress in the monetization of its AI investments including mass smart transportation and autonomous driving with the buzzwords Robotaxis and Robobuses thrown in. Unlike other EV makers, Baidu's strategy is akin to Google's (GOOGL) (GOOG) Android for smartphones.
Baidu Apollo Robobus
Source: Baidu Apollo
The company revealed strategic partnerships with 10 leading automakers for its Apollo self-driving platform and order-taking for its autonomous navigation pilot program. Less flashy AI businesses such as its AI Cloud also delivered, growing 67 percent year-over-year, reaching 2 billion yuan on an annualized basis.
Shortly after the release of the results, analysts were, almost like clockwork, publishing fresh upgrades on Baidu with upwardly revised price targets. I raised the likelihood of this happening in a prior article based on the woefully low consensus price target which was far from the prevailing traded price.
"The analysts risk looking uninformed and silly if they are slow to find new narratives to support a target price increase and upgrade the stock. The prevailing share price is already 31 percent higher than the consensus price target at $239.59. We have seen the phenomenon of analysts rushing to revise their target prices upwards happening at many tech stocks, including at the most prominent of all, Tesla. As the scenario gets played out, expect a positive feedback loop to fuel even more stock gains ahead."
Since my early October article titled Baidu: Surprisingly Cheap was published, the share price has risen 172 percent. However, with the forward P/E at 32 times for the fiscal period ending December 2021 and further reduced to 22 times with 2023 consensus estimates, it's hard to argue Baidu is no longer "cheap".
Source: Seeking Alpha Premium
The strong performance of Baidu had apparently single-handedly lifted the Invesco China Technology ETF (CQQQ) from a more than 3 percent drop intra-week to close nearly flat on Friday. Baidu is the top holding of the CQQQ ETF with an 11.7 percent weightage in the portfolio. Readers seeking another data point to support their investment thesis could consider looking at the Quant rating for Baidu which has been held at "Very Bullish" since the upgrade on November 23.
Source: Seeking Alpha Premium
The star of the week was again Baidu (BIDU) which muscled past the other internet giants to climb another 9.7 percent, adding on to its 15.9 percent jump the previous week. The Chinese search engine leader has been basking in newfound investor love as the next EV-maker wannabe.
The stock received further boosts from a strong Q4 2020 profit and the company placated investors for the revenue miss with an upside sales forecast. The management also shrewdly provided the soundbites during the earnings conference call that analysts were clamoring for in justifying higher price targets for the stock.
For instance, they emphasized the progress in the monetization of its AI investments including mass smart transportation and autonomous driving with the buzzwords Robotaxis and Robobuses thrown in. Unlike other EV makers, Baidu's strategy is akin to Google's (GOOGL) (GOOG) Android for smartphones.
Baidu Apollo Robobus
Source: Baidu Apollo
The company revealed strategic partnerships with 10 leading automakers for its Apollo self-driving platform and order-taking for its autonomous navigation pilot program. Less flashy AI businesses such as its AI Cloud also delivered, growing 67 percent year-over-year, reaching 2 billion yuan on an annualized basis.
Shortly after the release of the results, analysts were, almost like clockwork, publishing fresh upgrades on Baidu with upwardly revised price targets. I raised the likelihood of this happening in a prior article based on the woefully low consensus price target which was far from the prevailing traded price.
"The analysts risk looking uninformed and silly if they are slow to find new narratives to support a target price increase and upgrade the stock. The prevailing share price is already 31 percent higher than the consensus price target at $239.59. We have seen the phenomenon of analysts rushing to revise their target prices upwards happening at many tech stocks, including at the most prominent of all, Tesla. As the scenario gets played out, expect a positive feedback loop to fuel even more stock gains ahead."
Since my early October article titled Baidu: Surprisingly Cheap was published, the share price has risen 172 percent. However, with the forward P/E at 32 times for the fiscal period ending December 2021 and further reduced to 22 times with 2023 consensus estimates, it's hard to argue Baidu is no longer "cheap".
Source: Seeking Alpha Premium
The strong performance of Baidu had apparently single-handedly lifted the Invesco China Technology ETF (CQQQ) from a more than 3 percent drop intra-week to close nearly flat on Friday. Baidu is the top holding of the CQQQ ETF with an 11.7 percent weightage in the portfolio. Readers seeking another data point to support their investment thesis could consider looking at the Quant rating for Baidu which has been held at "Very Bullish" since the upgrade on November 23.
Source: Seeking Alpha Premium