OTTAWA, ONTARIO, CANADA - 2025/01/29: In this photo illustration, the Baidu, Inc. logo is seen ... [+] displayed on a smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images)SOPA Images/LightRocket via Getty ImagesChinese search engine behemoth Baidu’s stock (NASDAQ: BIDU) stock has been a laggard over the past year, declining by about 20% since the start of 2024. A couple of trends have impacted the stock. Firstly, China’s post-Covid-19 economic rebound has been wea ...

In the past two years, the focus of AI has been entirely on deploying large language models or in scaling the capex budgets to pack in more compute power at AI data centers. But 2025 has so farUttam is a growth-oriented investment analyst whose equity research primarily focuses on the technology sector. Semiconductors, Artificial Intelligence and Cloud software are some of the key sectors that are regularly researched and published by him. His research also focuses on other areas such as MedTech, Defense Te ...

Group 1: Company Performance - Baidu Inc. ended the latest trading session at $83.69, reflecting a +0.93% adjustment from the previous day's close, outperforming the S&P 500's gain of 0.88% [1] - Over the past month, Baidu's shares have depreciated by 6.26%, underperforming both the Computer and Technology sector's gain of 0.37% and the S&P 500's gain of 1.17% [1] Group 2: Upcoming Earnings - Baidu's earnings report is scheduled for February 18, 2025, with an anticipated EPS of $1.78, indicating a 42.21% decline compared to the same quarter of the previous year [2] - The consensus estimate for Baidu's revenue is $4.56 billion, down 7.31% from the prior-year quarter [2] Group 3: Analyst Estimates and Rankings - Recent changes to analyst estimates for Baidu indicate the dynamic nature of near-term business trends, with positive revisions reflecting analysts' confidence in the company's performance [3] - The Zacks Rank system currently places Baidu at 5 (Strong Sell), with the Zacks Consensus EPS estimate having moved 1.74% lower in the past month [5] Group 4: Valuation Metrics - Baidu has a Forward P/E ratio of 8.98, which is a discount compared to the industry average Forward P/E of 22.25 [6] - The company has a PEG ratio of 1.51, while the Internet - Services industry has an average PEG ratio of 1.56 [6] Group 5: Industry Context - The Internet - Services industry, which includes Baidu, is part of the Computer and Technology sector and holds a Zacks Industry Rank of 89, placing it in the top 36% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Investment Rating - The report maintains a "Buy" rating for Baidu (BIDU US) with a target price of $102.00, indicating a potential upside of 23.0% from the current price of $82.92 [1][4][14]. Core Insights - The report highlights that Baidu's core advertising revenue is expected to improve gradually starting from Q1 2025, with a potential year-on-year growth in the second half of 2025 due to the commercialization of AI search [2][6]. - The report anticipates that the Robotaxi RT6 model will significantly improve cost efficiency and accelerate the commercialization of autonomous driving applications [2]. - The financial forecasts for Baidu show a slight decrease in revenue growth rates for 2024 and 2025, with total revenue expected to be RMB 132.517 billion in 2024 and RMB 133.733 billion in 2025, reflecting a year-on-year decline of 1.5% and 0.8% respectively [3][16]. Financial Forecasts - Revenue projections for Baidu are as follows: - 2024E: RMB 132,517 million - 2025E: RMB 133,733 million - 2026E: RMB 140,750 million - The core business revenue is expected to be RMB 104,098 million in 2024, RMB 105,599 million in 2025, and RMB 110,360 million in 2026 [3][7]. - Adjusted operating profit is forecasted to be RMB 25,946 million in 2024, RMB 25,193 million in 2025, and RMB 27,244 million in 2026, with corresponding operating profit margins of 19.6%, 18.8%, and 19.4% respectively [3][8][16]. Stock Performance - Baidu's stock has shown a year-to-date change of -1.65% and has a market capitalization of approximately $23.21 billion [6][14]. - The stock's 52-week high and low are $115.13 and $77.43 respectively, indicating a significant range of price movement over the past year [6][14]. Conclusion - The report emphasizes the potential for revenue recovery driven by AI search commercialization and the expansion of autonomous driving services, while also noting the challenges in the advertising sector due to cautious spending in certain industries [2][6][7].

Financial Results Announcement - Baidu, Inc. will report its financial results for the Fourth Quarter and Fiscal Year 2024 on February 18, 2025, before the U.S. market opens [1] - The earnings conference call is scheduled for 7:30 AM U.S. Eastern Time on February 18, 2025 [1] Conference Call Registration - Participants are required to register in advance for the conference call using a provided link [2] - Upon registration, participants will receive a dial-in number, passcode, and unique access PIN via email [2] Accessing the Conference Call - A live and archived webcast of the conference call will be available on Baidu's investor relations website [3] - A replay of the conference call can be accessed by phone until February 25, 2025, with a specific reply PIN provided [4] Company Overview - Baidu was founded in 2000 and aims to simplify the complicated world through technology [4] - The company is recognized as a leading AI firm with a strong Internet foundation, trading on Nasdaq under "BIDU" and on HKEX under "9888" [4]

Investment Rating - The report maintains a "BUY" rating for Baidu, indicating a potential return of over 15% over the next 12 months [3][20]. Core Insights - Baidu is expected to experience a 4.8% year-over-year decline in total revenue for 4Q24, with a non-GAAP net income of RMB4.7 billion, influenced by a one-off impact from an equity investee [1][7]. - Cloud revenue growth is anticipated to be a bright spot, driven by strong demand in GPU cloud services, while the recovery pace of advertising revenue remains critical [1][7]. - The target price has been adjusted down by 6% to US$144.6, reflecting a more subdued recovery in the advertising business [1][11]. Revenue and Profitability - For FY24E, total revenue is projected at RMB132.3 billion, a slight decline from FY23A's RMB134.6 billion, with a forecasted growth of 3.2% in FY25E [2][9]. - Adjusted net profit is expected to decrease by 13% in FY24E to RMB25.0 billion, with a recovery to RMB26.0 billion in FY25E [2][9]. - The adjusted EPS for FY24E is forecasted at RMB71.47, with a consensus EPS of RMB72.60 for the same period [2][9]. Segment Performance - Baidu Core is projected to generate revenue of RMB26.9 billion in 4Q24, down 2.3% year-over-year, primarily due to an 8% decline in core advertising revenue [7][8]. - The cloud business is expected to grow by 13% year-over-year in 4Q24, improving from previous quarters, driven by AI GPU-related revenue [7][8]. Valuation Metrics - The SOTP-based target price of US$144.6 per ADS translates to a 14x 2025E non-GAAP PE, or 7x if excluding net cash [11][12]. - The valuation breakdown includes US$49.1 for Baidu Core, US$0.3 for Apollo ASD, and US$32.6 for Baidu Cloud [11][12]. Cash Position - As of the end of 3Q24, Baidu had approximately RMB144.5 billion in cash on hand, equating to about US$57 per ADS [1][7].

Company Performance - Baidu Inc. closed at $79.53, reflecting a +1.75% change from the previous session, outperforming the S&P 500's gain of 0.12% [1] - Over the past month, Baidu's shares have decreased by 11.52%, which is significantly worse than the Computer and Technology sector's loss of 3.73% and the S&P 500's loss of 3.45% [1] Earnings Report Expectations - The upcoming earnings report is expected to show an EPS of $2.03, representing a 34.09% decline compared to the same quarter last year [2] - Revenue is projected to be $4.59 billion, indicating a 6.69% decrease from the equivalent quarter last year [2] Analyst Estimates and Ratings - Recent changes to analyst estimates for Baidu reflect short-term business trends, with upward revisions indicating analysts' positive outlook on the company's operations [3] - Baidu currently holds a Zacks Rank of 5 (Strong Sell), with the Zacks Consensus EPS estimate remaining unchanged over the past month [5] Valuation Metrics - Baidu's Forward P/E ratio is 8.34, which is a discount compared to its industry's Forward P/E of 21.51 [6] - The company has a PEG ratio of 1.4, while the Internet - Services industry has an average PEG ratio of 1.5 [6] Industry Context - The Internet - Services industry is part of the Computer and Technology sector, holding a Zacks Industry Rank of 54, placing it in the top 22% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Stocks Added to Zacks Rank 5 (Strong Sell) List - Denso (DNZOY), a global manufacturer and supplier of automotive technology, systems, and auto parts, has seen its Zacks Consensus Estimate for current year earnings revised downward by 17.3% over the last 60 days [1] - Central Garden & Pet (CENTA), a leading innovator and producer of branded products for the lawn & garden and pet supplies markets, has experienced a 7.5% downward revision in its Zacks Consensus Estimate for current year earnings over the last 60 days [2] - Baidu (BIDU), a Chinese-language Internet search provider based in Beijing, has had its Zacks Consensus Estimate for current year earnings revised downward by 5.2% over the last 60 days [2]

Group 1: Market Overview - The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite rose by 13%, 23%, and 29% respectively in 2024, reaching multiple all-time closing highs [1] - Despite significant gains, there are still investment opportunities available for those willing to seek them out [1][2] Group 2: NextEra Energy - NextEra Energy is highlighted as a strong investment option due to its focus on renewable energy, with nearly half of its 72 gigawatts (GW) of capacity coming from renewable sources [7] - The company has demonstrated sustained high-single-digit earnings per share (EPS) growth and double-digit annual dividend growth, aided by lower electricity generation costs [8] - NextEra anticipates bringing 36.5 GW to 46.5 GW of new renewable and storage projects online from 2024 to 2027, and its forward price-to-earnings (P/E) ratio is less than 20, marking a 22% discount to its five-year average [9] Group 3: Baidu - Baidu holds a 45.2% share of China's internet search market and has maintained a significant market presence over the past decade, providing substantial ad-pricing power [11] - The company is positioned for growth through its involvement in artificial intelligence (AI) and cloud infrastructure services, with its AI solution Ernie handling 1.5 billion API calls per day as of November [13] - Baidu's balance sheet is strong, with nearly $30 billion in net capital, allowing for share buybacks that can enhance EPS [15] Group 4: Annaly Capital Management - Annaly Capital Management has declared $27 billion in dividends since its IPO and currently offers an annual yield of almost 14% [16] - The company primarily invests in agency assets, with $72.5 billion of its $81.8 billion portfolio in highly liquid agency securities, providing a safety net against defaults [20] - Annaly's valuation is attractive, trading at a 3% discount to its book value, making it appealing for income-seeking investors [21]

Company Performance - Baidu's shares surged in September following Beijing's announcement of a generous stimulus package aimed at supporting the economy and the struggling real estate sector [1] - Baidu's valuation has returned to pre-stimulus levels [1] Market Context - The stimulus package is designed to prop up the ailing economy and the real estate sector, which has been struggling [1] Analyst's Portfolio - The analyst's portfolio is focused on high-risk, high-reward situations, primarily in the technology markets [1] - The analyst is an early buyer of Bitcoin and holds a portfolio with asymmetric long-term upside potential [1] - Top holdings in the analyst's portfolio include Bitcoin, Tesla, Google, Amazon, and Nvidia [1]