As questions about the Chinese economy have grown bigger over the course of 2015, one of the most obvious problems for analysts has been trying to make sense of where stocks that are outside the circle of China’s most trouble sectors might be headed. One of the most important questions is: where is Baidu’s stock price (Nasdaq: BIDU) headed? Baidu has long been the dominant search engine employed by Internet users in the world’s most populated country and second largest economy. It’s not highly leveraged, and it doesn’t have ties to sectors such as real estate, exports or construction that are likely to suffer the brunt of any economic downturn in China. Where do analysts see BIDU’s stock price going over the coming months?
The consensus among stock market rating analysts is that BIDU is somewhere between an “overweight” and a “buy” rating. While BIDU did receive several downgrades over the summer of 2015, these downgrades typically moved it from a “buy” to a “hold” rating, and there are currently no major analysts who have BIDU listed as a “sell” rating stock.
According to MarketWatch, a total of 31 analysts have a rating listed for Baidu’s stock. Of these, the majority, 20 of the 31, are either a “buy” or a “strong buy” rating. One is considered an “overweight” rating, 9 are “hold ratings and one is an “underweight” rating.
Analysts who support BIDU feel that company’s greatest strength lies in its current financial situation. The company is not heavily leveraged, and shows robust growth in revenues. Internet and tech stocks in emerging markets have been attractive to investors and remain so, as the penetration of Internet usage in countries such as China still remains fairly low compared to Western economies.
The biggest concern held against BIDU is the company’s spending on search advertising. However, in its August 31, 2015 upgrade of BIDU from a “hold” to a “buy” rating, analysts from Jefferies said that these concerns have been overstated and are already likely to have been priced into the value of the stock.
BIDU stock has traded between $100 and $250 over the last 52 weeks. The stock’s value recently has hovered around $150, attracting additional interest from buyers who feel it may be oversold. With a price-to-earnings ratio of around 24, BIDU is considered by most analysts to have a lot of room for further growth, especially for a tech stock whose future is still seen to be ahead of it.
Analysts on either side of the argument do, however, recognize the strong headwinds that are facing the larger economy in China. It remains reasonable to assume that BIDU’s stock price will be restrained at least somewhat by events in China going forward. One of the more interesting speculations about the stock’s future arises from questions about how China might elect to cope with the current economic downturn. There is a scenario where the Chinese government begins to abandon high-growth models and begins to focus on improving internal consumer markets over export and manufacture. In such a scenario, it would be expected the stocks like BIDU would see a benefit from increased consumption and a more stable long-term economic outlook.
The range of one-year price targets by analysts for BIDU stock goes from $150 to $268. The consensus one-year price target is currently around $210 per share. The consensus earnings forecast envisions some drop in earnings, but the company’s overall financial situation is still considered strong. Likewise, many analysts feel that these concerns are already priced into the current valuation of BIDU stock.
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