Baidu trades an average of more than 3 million ADSs a day and has a market cap of nearly $76 billion. Year to date, the stock is down more than 5% compared with the Nasdaq Composite, which has added nearly 6% since January 2. Since it came public in 2005, its shares are up more than 2,500%. Even Apple cannot match that, although its stock has posted a gain of more than 1,500% in the same period.
Baidu hit an all-time high share price of $251.99 last November, and the stock has dropped nearly 14% since then. Following its fourth-quarter earnings release in February, the stock was downgraded from Buy to Hold at Stifel, while Oppenheimer maintained an Outperform rating and cut the price target from $280 to $230.
The stock continues to trade with a high multiple, and the question is whether its growth will continue to support that nearly 22-times multiple on forward earnings. Because the company pays no dividend, share price growth is where the returns are for investors.
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The first quarter is seasonally slower for Baidu, and this year’s Chinese New Year holidays came later than usual, which could also have a negative impact on results. Baidu has also made significant investments in mobile and it is paying off in traffic. Unfortunately, mobile advertising does not pay off as well as desktop advertising and that could hold down revenues and profits.
Baidu traded down about 0.8% at $217.56 in the early afternoon on Wednesday. The 52-week trading range is $148.44 to $251.99 per ADS.
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