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Baidu's (BIDU) AI Positioning May Turn Around its Fortune
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Baidu, Inc. (BIDU - Free Report) , the China-based tech major, reported fourth-quarter fiscal 2023 earnings on Feb 28. It recorded an 8% year-over-year increase in total revenues and an expansion of the non-GAAP operating margin from 22% to 24%. Baidu reported earnings of $3.08 per share, beating the Zacks Consensus Estimate of $2.75. However, quarterly revenues of $4,923 million marginally missed the Zacks Consensus Estimate of $4,925 million.
The company's shares have remained volatile since the beginning of 2023, having declined 34.3% through the period. However, Baidu's advancements in AI, specifically with its product line of ERNIE and ERNIE Bot, have positioned it well in the current phase of AI optimism. The company’s recent financial turnaround is supported by its strategic focus on AI and cloud technologies. Its efforts to commercialize Gen AI and foundation models should aid its revenue growth. Also, by launching EP 4.0 and with major companies adopting ERNIE API, Baidu is cementing its position as a major AI player in China.
Baidu has also benefited from the reopening of China’s economy following the worst of the COVID-19 pandemic. Unpredictable lockdowns and stringent practices have ailed the company’s progress over the COVID years as the government tried to restrain the spread of the virus. This is now a thing of the past.
One must also consider the fact that Baidu is historically cheap, and its price has been falling. This presents a classic case of “buy-the-dip,” especially with the future looking bright for the company. The company’s shares were trading at $98.25 as of Mar 5, with its U.S. equivalent Alphabet Inc. (GOOGL - Free Report) and the AI story of the season, NVIDIA Corporation (NVDA - Free Report) , trading at $132.67 and $859.64, respectively.
Also, Baidu's core business segment continues to be its internet search engine. In January 2024, the company accounted for approximately 60% of internet searches within China. Even if the AI bubble bursts, it is less exposed than potentially over-valued companies like NVIDIA, which currently sports a Zacks Rank #1 (Strong Buy). Both Alphabet and Baidu carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
However, with its expected earnings growth rate for the current year being 16.5% and with the optimism surrounding AI, there is a high probability that the stock’s rating will be upgraded in the near future. Prudent investors might consider investing in the stock now, with its price currently trading near one-year lows.
Bottom Line
Baidu continues to be the most popular Search Engine in China and has leverage in implementing its AI products. As long as it stays on top of its AI game and China’s economy holds up, it remains a lucrative prospect.
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Baidu's (BIDU) AI Positioning May Turn Around its Fortune
Baidu, Inc. (BIDU - Free Report) , the China-based tech major, reported fourth-quarter fiscal 2023 earnings on Feb 28. It recorded an 8% year-over-year increase in total revenues and an expansion of the non-GAAP operating margin from 22% to 24%. Baidu reported earnings of $3.08 per share, beating the Zacks Consensus Estimate of $2.75. However, quarterly revenues of $4,923 million marginally missed the Zacks Consensus Estimate of $4,925 million.
The company's shares have remained volatile since the beginning of 2023, having declined 34.3% through the period. However, Baidu's advancements in AI, specifically with its product line of ERNIE and ERNIE Bot, have positioned it well in the current phase of AI optimism. The company’s recent financial turnaround is supported by its strategic focus on AI and cloud technologies. Its efforts to commercialize Gen AI and foundation models should aid its revenue growth. Also, by launching EP 4.0 and with major companies adopting ERNIE API, Baidu is cementing its position as a major AI player in China.
Baidu has also benefited from the reopening of China’s economy following the worst of the COVID-19 pandemic. Unpredictable lockdowns and stringent practices have ailed the company’s progress over the COVID years as the government tried to restrain the spread of the virus. This is now a thing of the past.
One must also consider the fact that Baidu is historically cheap, and its price has been falling. This presents a classic case of “buy-the-dip,” especially with the future looking bright for the company. The company’s shares were trading at $98.25 as of Mar 5, with its U.S. equivalent Alphabet Inc. (GOOGL - Free Report) and the AI story of the season, NVIDIA Corporation (NVDA - Free Report) , trading at $132.67 and $859.64, respectively.
Also, Baidu's core business segment continues to be its internet search engine. In January 2024, the company accounted for approximately 60% of internet searches within China. Even if the AI bubble bursts, it is less exposed than potentially over-valued companies like NVIDIA, which currently sports a Zacks Rank #1 (Strong Buy). Both Alphabet and Baidu carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
However, with its expected earnings growth rate for the current year being 16.5% and with the optimism surrounding AI, there is a high probability that the stock’s rating will be upgraded in the near future. Prudent investors might consider investing in the stock now, with its price currently trading near one-year lows.
Bottom Line
Baidu continues to be the most popular Search Engine in China and has leverage in implementing its AI products. As long as it stays on top of its AI game and China’s economy holds up, it remains a lucrative prospect.