- Baidu, “China’s Google,” is a buy-and-hold stock.
- Hundreds of millions of Chinese are likely to come online in the next few years, and Baidu will continue to own the largest slice of the Internet services market in China.
- China is attempting to switch from an export economy to one with more emphasis on Chinese consumers.
- Baidu will pragmatically focus on the fast-growing and very profitable Online-to-Offline market.
- For the longer term, Baidu is developing world-class Artificial Intelligence.
Earlier this week China’s Internet giant Baidu (NASDAQ:BIDU) went down to below $140 on Nasdaq, close to a 2-years low. In view of the evident value and growth prospects of the company, this seems a good moment to buy – but investors should hurry because Baidu stock price is now rising again. Actually, Baidu Stock remains a buy-and-hold despite the recent fall of Chinese stocks.
Also see: You might also be interested in Baidu stock analysis video.
Baidu is the closest thing to a Chinese Google. Despite the stellar growth of internet access in China over the last few years, less than half of China’s huge population has internet access, as opposed to near-saturation levels in the US and Western Europe. Putting the numbers together shows that hundreds of millions of Chinese are likely to come online in the next few years, and Baidu will continue to own the largest slice of the Internet services market in China.
“China is attempting to switch from an export economy to one with more emphasis on the consumer,” notes this author on Seeking Alpha. “This means less manufacturing and more services.” That can explain many apparently negative trends in China’s economy. For example, decreasing power consumption can be explained by the country’s economy shift from power-intensive manufacturing to other sectors.
Besides offers nearly all the staple services of Google, including search, maps and location-based services, Web advertising and analytics, news, financial information, social networking, cloud services, smartphone software and mobile services, and the paid video platform iQiyi. In addition, it also offers some services that Google doesn’t provide, such as anti-virus services and a Wikipedia-like encyclopedia. The similarity of Baidu’s services to Google’s, and the penetration of Baidu in China, indicate that Baidu’s growth and profitability should continue over the next few years.
The Motley Fool recently reported that mobile accounts for over 50% of Baidu’s total revenue, which opens up the fast-growing and very profitable online-to-offline (O2O) market, where transactions are initiated online and completed offline. Baidu recently invested in Chinese app-based O2O laundry cleaning and delivery service Edaixi, which allows customers to arrange for a laundry pickup via their smartphones.
Baidu has announced that it will focus on similar practical applications for the uprising Chinese urban middle class, and spend $3.2 billion on O2O initiatives during the next three years. That seems a smart move typical of Chinese pragmatic mentality – Baidu is focusing on the money. The Motley Fool believes the investments in O2O, mobile, and video will pay off and push the value of Baidu stock upward.
For the longer term, Baidu is working to develop and deploy the same next-generation Artificial Intelligence (AI) technologies that leading internet companies are betting on. A few months ago Andrew Ng, a Stanford professor who played a key role at Google in AI, left Google and joined Baidu’s artificial-intelligence research lab in Silicon Valley.
Artificial Intelligence research at Baidu is focused on deep learning, which aims to improve search and cloud computing by training computers to work more like the human brain, and developments relevant to emerging Internet business trends, such as natural language processing, speech recognition, automatic translation, computer vision with image and context recognition.
"I don't work on preventing AI from turning evil for the same reason that I don't work on combating overpopulation on the planet Mars,” said Ng in an interview published in the Huffington Post. Baidu’s CEO Robin Li expressed a similar pragmatic, business-oriented approach to AI research in a discussion with Bill Gates and Elon Musk.
“Whoever wins artificial intelligence will win the Internet in China and around the world,” said Ng. “Baidu has the best shot to make it work.”
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