Baidu, Inc.’s (BIDU) stock has rebounded in recent months after a rocky start to 2020. The Chinese technology company was recently added to the WhaleWisdom Whale Index. Though not on the WhaleWisdom Heatmap, Baidu’s increasing profits and addition to the Index may indicate a potential turn around for the technology company.
Baidu is a leading Chinese technology company specializing in internet search services and one of the largest providers of artificial intelligence (AI) products in the world. The company appears to have faced and moved beyond the negative impact of China’s economic slowdown and other business challenges related to the coronavirus outbreak. The pandemic also places unique opportunities for the company as industries such as healthcare may be seeking out AI to streamline processes.
Mixed Results from Hedge Funds and Institutions
Baidu has caught the attention of hedge fund managers. Looking at first quarter activity by the top hedge funds, the aggregate 13F shares held improved to about 73.9 million from 73.5 million, an increase of approximately 0.6%. Of the hedge funds, 21 created new positions, 51 added to an existing holding, 37 exited, and 56 reduced their stake. In slight contrast to hedge funds, institutions were selling. Overall, institutions decreased their aggregate holdings by about 1.1%, to approximately 183.3 million from 185.2 million.
Positive Multi-year Estimates
Analysts expect to see earnings initially fall in 2020, but also anticipate a rise in 2021 and 2022 of approximately 28.1% and 21.3%, respectively. These significant year-over-year estimated increases would bring earnings to $10.23 per share in 2022, up from $6.59 for 2020.
With Baidu’s July announcement that it will construct new infrastructure for a future smart economy, excitement builds, and Baidu is seen as a significant driver for China’s future economic development. Baidu plans to increase investments in areas such as cloud computing, AI, blockchain, and data centers. Even more impressive is that under the new infrastructure, Baidu has set the goal of five million intelligent cloud servers by 2030, with about five million trained AI professionals supporting them.
Mizuho Financial Group’s analyst, James Lee, has a favorable outlook for Baidu’s stock, likely recognizing that the demand for internet, cloud computing, and AI technology continues to be high. Lee maintains a buy rating on shares with a $175 price target.
Baidu’s recent profit growth and future estimates are certainly encouraging for investors, especially after a rough start to the year. Baidu also appears well-positioned to act upon new demand for its technology, though time will tell as to whether the forward momentum continues.