Chinese tech giant Baidu, Inc. (HK:9888) (NASDAQ:BIDU) is in the limelight after surpassing fourth-quarter Fiscal 2023 estimates. BIDU stock rose over 2% this morning in Hong Kong listing but has lost over 5% in the past five trading sessions. The company’s exorbitant spending on generative artificial intelligence (AI) has eaten into its profits, which fell 48% year-over-year in Q4 FY23. Nonetheless, analysts remain bullish on Baidu stock, given its long-term growth potential.
Baidu’s search engine is a market leader in China. Meanwhile, Baidu’s generative AI chatbot Ernie is expected to disrupt the local competition once it is fully equipped and receives a green signal for a full commercial roll out from the authorities.
Here’s What Analysts Say About Baidu
Following Baidu’s Q4 print, DBS analyst Tsz Wang reiterated a Buy rating on the shares with a price target of HK$186 (83.8% upside potential). Wang is impressed with Baidu’s AI Cloud growth prospects in Fiscal 2024 and projects a CAGR (compound annual growth rate) of 17% in FY22-FY25.
Moreover, the company’s advertising revenue is gaining momentum and is forecasted to resume double-digit growth once the economy rebounds.
Wang also projects Baidu’s autonomous driving unit, hosting the Robotaxi, Apollo Self Driving (ASD) system, and other offerings, to grow at a CAGR of 35% over the next three years.
Likewise, Goldman Sachs analyst Lincoln Kong reiterated a Buy rating on Baidu shares but lowered the price target to HK$167 (65% upside potential) from HK$170. Key reasons for trimming the price target and lowering FY23-24 estimates were sluggish macro recovery and ad spending, high competition in the advertising and research segment, and delay in monetizing the AI spend.
Kong noted Baidu’s increasing revenue mix from generative AI solutions while its core advertising revenue remains under pressure from macro headwinds. Kong forecasts additional revenues of RMB 3 billion to RMB 6 billion from the generative AI solutions in 2024.
Importantly, Kong expects Baidu’s continuous stock buybacks to boost its share price, which has lost steam lately.
Is Baidu Stock a Good Buy Now?
Based on three unanimous Buy ratings, 9888 stock has a Strong Buy consensus rating on TipRanks. The Baidu, Inc. Class A share price forecast of HK$154.67 implies 52.8% upside potential from current levels.
Ending Thoughts
Baidu’s dominant presence in the search engine space and increasing push towards the generative AI market are expected to help the company regain its long-lost glory. Analysts expect the stock to appreciate tremendously in the next twelve months.
