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Is Baidu worth US$300 a share?

Jidu Auto, the electric vehicle project from Chinese search engine company Baidu and automaker Zhejiang Geely, will pump in US$7.7 billion into production over the next five years.

  • Baidu Inc (NASDAQ: BIDU) saw its US-listed shares hit a three-week high of US$221 recently
  • Meanwhile Baidu's Hong Kong Listing (HKG: 9888) also rallied over 3.5% to HK$218 at the start of the week
  • The gains came after its electric vehicle (EV) venture with Zhejiang Geely Automobile, Jidu Auto, announced plans to invest US$7.7 billion into smart car technology
  • Most analysts view the US stock as a ‘buy’, and see a 26% upside in the next 12 months
  • Buy and sell BIDU shares with an IG account

Baidu share price: what’s the latest?

Shares of Chinese internet company Baidu rallied as much as 3.5% this week, after its EV joint venture with Zhejiang Geely Holding, Jidu Auto, said it would pump in 50 billion Chinese yuan (US$7.7 billion) into production over the next five years.

Baidu, along with other unnamed investors, will provide the funds, Jidu Auto’s CEO Xia Yiping told Reuters last week.

The new company, in which Baidu owns a 55% stake and Geely has a 45% stake, plans to employ between 2,500 and 3,000 staff for the project over the next two to three years. Roughly 500 of this headcount will be made up of software engineers.

Xia added that Jidu is aiming to roll out its first electric vehicle in three years, which is the standard industry timeline. Thereafter, it will launch a new model every 12 months to 18 months.

The company will also unveil its branding in the third quarter of 2021, Xia added.

Jidu’s first EV model, Xia said, will be designed to resemble a ‘robot’ in an attempt to appeal to younger customers. ‘It will make you feel like it's a robot that can communicate with you with emotions,’ he further noted.

For a start, Jidu hopes to manufacture cars using Geely’s open-source EV platform as well as its Hangzhou Bay plant in the city of Ningbo. Distribution wise, it plans to sell its cars directly to customers without the use of dealerships in the initial phase.

Where do analysts see BIDU stock heading?

Following the news, Baidu’s Hong Kong-listed shares rallied to hit a three-week peak of HK$218.20 on Monday morning (27 April 2021).

Its US stocks also rose over 3% to US$221.31 last Friday (23 April).

In terms of outlook, BIDU has a consensus rating of ‘buy’ from 15 out of 17 analysts, and a 12-month average price target of US$273.27, based on the latest data from MarketBeat.

The latest investment thesis came from China Renaissance Securities analyst Ella Ji on 21 April, who reiterated a ‘buy’ call on the stock, while reducing the share price estimate to US$300 from US$325.

Ji opined that she expects Baidu’s core advertising to ‘rebound nicely’ in the first quarter of 2021 thanks to strong mobile traffic as well as the increase in revenue contribution from major cloud deals.

She also cites Ji’s plans to ‘gradually’ introduce autonomous driving packages throughout the rest of the year. For now, she notes that Ji’s revenue contribution remains small.

Meanwhile, OTR Global analysts upgraded their view on BIDU to ‘positive’ from ‘mixed’ on 13 April, after new data showed that spending growth on Baidu’s search engines accelerated in Q1.

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