Baidu: Significant Value At A Low Price

Summary

• Baidu is significantly underpriced with a P/E ratio of 8.2X, offering an earnings yield in excess of 12%.
• Despite a slight revenue decline in Q4'24, Baidu remains highly profitable and continues to execute substantial stock buybacks.
• Baidu's dominant position in China's search engine market ensures steady advertising income and long-term earnings growth potential.
• Baidu's low valuation paired with its high gross margins and positive FCF underpins the value proposition.
• Risks include competition from other search engines like Bing, which could pressure Baidu's market position and core segment.

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Shares of Baidu (NASDAQ:BIDU) have consolidated since October 2024, which is when initial excitement about Beijing's stimulus package started to fizzle out. The valuation draw-down creates a new investment opportunity for investors. However, that want to add a highly profitable Chinese

Analyst’s Disclosure:I/we have a beneficial long position in the shares of BIDU, BABA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.