Baidu stock price hits fresh highs on EV news
Search giant Baidu Inc’s stock has touched record levels, driven by news that it might make its own electric cars, despite a potential US delisting law.
- Baidu (Nasdaq: BIDU) share price reaches US$191.26 a share, exceeding analysts’ forecasts
- The artificial-intelligence heavyweight might use contract manufacturing to produce its own EVs
- In 2021, its core search business could see revenue recovering, analysts say
- Meanwhile, Donald Trump has signed a new law that could remove Chinese stocks from the US
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Why did Baidu’s shares climb recently?
The uptrend in Baidu Inc’s stock price sped up in the past two weeks, hitting two-year highs. Based on its US$191.26 close on Tuesday (22 December 2020), shares have jumped 33% since 07 December.
The biggest surge came last Tuesday (15 December), when Reuters reported the Chinese search-engine leader was considering making its own electric vehicles (EVs) and has held talks with automakers.
Aside from its search engine, Baidu’s other businesses include developing self-driving technology via its Apollo unit, running its autonomous-taxi service Go Robotaxi, and offering artificial intelligence (AI) solutions.
The Internet behemoth is considering contract manufacturing for its own EVs or creating a majority-owned venture with carmakers, Reuters reported.
Building cars would be a major step in Baidu’s efforts to diversify income streams as growth stagnates in the core search business, Reuters added.
After the report, Baidu’s Nasdaq-listed shares finished at US$185.50, up 13.8% from the previous day.
That has surpassed market expectations for Baidu; the latest average price target from 12 Wall Street analysts was about US$181.58, with 11 recommending ‘buy’ and one rating it ‘hold’.
What’s in store for Baidu in 2021?
Jefferies analysts, who have a ‘buy’ call on Baidu, noted that the online advertising realm continues to see stiff competition, but they expect Baidu to return to year-on-year growth in the segment in 2021 with the recovery of verticals and increasing in-app search.
Within the entertainment live-streaming space, there are potential synergies between Baidu and Nasdaq-listed Joyy Inc, added the Jefferies team.
Joyy runs live-streaming social media platforms, including YY Live in mainland China, while Baidu owns iQiyi, often dubbed the Netflix of China. Baidu in November announced it will acquire Joyy’s China-based business for US$3.6 billion, and the transaction is expected to occur in the first half of 2021.
LightStream Research’s Shifara Samsudeen wrote that Baidu should be able to overcome the cyclicality of its advertising revenues through YY’s virtual gifting revenues.
However, some of Baidu’s previous attempts to diversify away from its core revenues had been unsuccessful, and it is also a late entrant to the Chinese short-video streaming market, she said.
The YY deal is thus unlikely to bring significant change to Baidu’s financials or pose a threat to competitors, in Samsudeen’s view.
Potential law could remove Chinese stocks from US
Separately, US President Donald Trump last Friday (18 December) signed legislation that could kick Chinese companies off of US stock exchanges unless American regulators can review their financial audits.
The measure could affect corporate giants like Baidu and Alibaba Group, Bloomberg reported. While it includes a phase-in period, with penalties taking effect after three straight years of non-compliance, it could pose real damage on Chinese firms that fail to meet the audit standards.
Although the delisting law applies to any foreign company, the bill’s sponsors said their intention is to target China.
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