Baidu Inc. - Stocks

Instrument description

The Internet has revolutionized nearly segment of the market and provided information to millions of users on their fingertips. The advancement of mobile technology has further increased the importance and value of the Internet. An internet search engine is a fundamental tool that allows a person to write a particular keyword and get quick and relevant information. The information one gets may be in the form of a website link, image, article, research paper, video, or infographics.

Google, for example, is the benchmark when it comes to searching for anything and everything. Every day millions of people use Google for information. Google is so popular that it has over 75% market share when it comes to search engines. However, other search engines do exist and regularly used by users such as Bing, Yandex, Baidu, Swisscows, DuckDuckGo, Gibiru, and OneSearch.

Baidu Inc. is a search language in the Chinese language, and Baidu is the most dominant search engine in China and has nearly 82% of market share in China, whereas Google has 0.61%. Baidu does provide internet services all across the world, but its focus is mainly in China for local Chinese residents.

Baidu is a search platform similar to Google. It allows Chinese people to easily search for information and get information in the form of webpages, images, news, videos, and other relevant documents. Apart from the internet platform, the company also provides a platform that allows businesses to engage its customers.

History of Baidu

Baidu was founded in 2000 and is based in Beijing, China, by Robin Li, and the company currently has nearly 40,000 employees. Baidu was the first company to be included in the NASDAQ-100 Index in 2007. Baidu is a Chinese word which in English means ‘Hundreds of times.’ The name Baidu is inspired by a Chinese poem written 800 years ago in the Song Dynasty that talks about a person achieving his dream while facing obstacles that come in life.

Robin Li previously developed the search technology Rankdex, which a method that does hyperlink analysis. His mission was to provide people with a search engine where they can easily find what they are searching for. The culture that Robin Li employed was simplicity and reliability. For the last 20 years, Baidu has strived to timely update its systems, and optimize its services according to modern trends and preferences of users.

Baidu went public with its first initial public offering (IPO) on the NASDAQ with ticker symbol ‘BIDU’ in August 2005. The company moved its headquarters to Shangdi in 2009 and also launched an online marketing system called ‘Phoenix Nest.’ In 2010, Baidu released iQIYI, which is an online platform for videos.

In July 2011, Baidu acquired a major stake in Qunar worth $306 million. Baidu made series of acquisitions in 2013 by buying online video business of PPS for $370 million, acquiring 59% of Nuomi from RenRen for $160 million, and also taking 100% equity interest in 91 Wireless from NetDragon for $1.9 billion. In 2014, Baidu launched Baidu Takeout Delivery, and Baidu Wallet. Baidu’s mobile revenue accounted for 50% of the company’s total revenue in 2015.

Current Business and Investment of Baidu

Baidu holds complete dominance when it comes to internet searches in China. According to statistics, Baidu records 3.3 billion searches every day. Baidu runs and manages three essential business segments that are Baidu Core Services, Transaction Services, and iQIYI.

• The Baidu Core segment features simple search options. Users can search using keywords. The search services are keyword-based and triggered by search queries by users. The segment also includes Pay for Performance (P4P) services and other online marketing services.
• The Transaction segment includes various payment options such as Baidu Nuomi, Baidu Connect, Baidu Takeout Delivery, Baidu Wallet, and Baidu Maps.
• iQIYI refers to an online video platform that has a wide database and includes licensed movies, cartoons, television series, reality shows, and other programs

The different services of Baidu and their purpose are

• Baidu App: It gives access to users to collect information and news feed using mobile devices
• Baidu Search: It allows search of information through mobile browsers
• Baidu Feed: The news and interests of the user are presented according to browsing history
• Baidu Post Bar: It is a social media platform
• Bear Paw Account: It allows businesses and verified brands to view their content from the website and other open platform applications.
• Baidu Knows: A platform where users can share knowledge
• Baidu Education and Encyclopedia: An online platform providing educational resources
• Baidu Wallet: A marketplace mobile application
• Baidu Consumer Credit: A payment service that allows installment option
• Baidu Wealth Management: A service that allows users to manage their wealth
• Baidu Mobile Guardian: A security software for the phone
• Baidu Cloud Drive: A cloud system for users for storage of their data
• Baidu Maps: A navigational service that informs users about specific locations and routing options

Baidu is making wide investments in new technology such as Artificial Intelligence (AI) and developing new technology that will be adopted later by other technological firms.

Risk and Potential in Baidu Business Environment

Baidu is a leader in search engine in China for users who want to access information either using desktop computers, laptops, or mobile phones. Baidu is an I.T and Technology company that is growing tremendously due to its timely adaptation of innovative technology and delivering a wide range of services to Chinese internet users.

• Strengths

Baidu has a strong and dominant position in China that also is a country with the largest population, which allows the company to generate big revenues each year. Baidu is also used in countries close to China, such as Japan, Thailand, and India. The company has a wide range of user-friendly services and applications that cater to a specific aspect. Baidu has an efficient revenue model and invests heavily in Research and Development, which includes AI and automation services.

• Weaknesses

The biggest weakness of Baidu is that it is focused on one market, which is China. But on the contrary, the Chinese market is so huge that the company generates a wide amount of revenue. Baidu has limited market share and popularity outside of China. The company’s e-commerce subsidiary is separate and does not add to the revenue of the parent company.

• Opportunities

Baidu is a huge technological firm in China when it comes to internet services, and there are very few local rivals that can compete with Baidu. The growth opportunity for Baidu is immense as it has already established the necessary infrastructure, which can be expanded easily.

• Threats

Baidu has increasing challenges and competition from international search engines such as Google and Yahoo. If the restrictions on Google are lifted in China, then Baidu will even face tougher competition. The Chinese government implements strict rules and regulations that Baidu must follow. The rate of technological advancement is rapid, and Baidu lacks adequate resources to match the speed of innovation. The competitors of Baidu are Alibaba, Tencent Holdings, Netease, RenRen, Google, Bing, and Facebook.

Stock Analysis of Baidu

Baidu is listed and actively trades on the NASDAQ with the ticker symbol ‘BIDU.’ The company is listed under the ‘Technology Services’ Sector, and the industry is ‘Internet Software/Services.’

Coronavirus pandemic has affected businesses all over the world, and the first country to get affected was China. However, Baidu is expecting stronger earnings and a financial boost from Tencent that is predicted to lift the share price. Baidu posted an increase in EPS at $1.25, but revenue fell 7% to $3.18 billion due to the Covid-19 outbreak in the first quarter as the Coronavirus cases peaked in February 2020.

In the second quarter, the earnings are predicted to fall by 2.7%, and the share price would be $1.43, and by the end of 2020, the EPS is expected to shrink 13%. Baidu’s revenue has fallen by 3.8% in the second quarter of 2020.

As the stock value of Baidu is going to rise once the Coronavirus issue is settled some traders may consider to hold the shares and take a long position.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.