Baidu Hops Aboard the Electrical-Car Specific

The autumn and rise of China’s search-engine big Baidu epitomizes the market zeitgeist of 2021 completely: a mania for development and a yawn for worth.

As soon as talked about in the identical breath with Chinese language web titans Alibaba and Tencent, utilizing the acronym BAT, Baidu’s pull has severely eroded in contrast with its rivals over the previous few years. Its Nasdaq-listed shares misplaced 70% of their worth from 2018 to the trough reached in March final yr. Its core promoting enterprise is threatened by rivals reminiscent of TikTok’s proprietor, Bytedance, which has attracted advert {dollars} as customers flock to the viral content material on its apps.

Baidu reported better-than-expected outcomes for final quarter Wednesday after the market shut, helped by its cloud enterprise. However its core search enterprise stays weak: The corporate’s promoting income was flat year-over-year in contrast with double-digit development a couple of years in the past.

Regardless of the anemic development in its core enterprise, Baidu stays a money cow. It generated $3.8 billion of free money move final yr, excluding its unprofitable video subsidiary iQiyi . The corporate was sitting on $15 billion of internet money on the finish of December and its stakes in iQiyi and on-line journey agent Journey.com are valued at $13 billion. And till late final yr, the inventory was buying and selling as little as 1.2 instances guide worth, making Baidu a basic worth inventory.

However worth shares are unloved out there. It took hopping aboard the electric-vehicle practice to assist Baidu shares stage a powerful turnaround. As a substitute of cut price hunters speeding in, the corporate has hit all the precise tones by asserting a foray into EVs—one of many hottest funding themes proper now. Baidu stated final month it can accomplice with Chinese language auto maker Geely, which controls Volvo Automobiles, to make EVs. Baidu’s inventory hit an all-time excessive this week after greater than doubling since December. Baidu has developed its personal self-driving expertise platform known as Apollo for years, although buyers didn’t pay a lot consideration till now.

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