Chinese technology company Baidu’s 28% decline so far this year has piqued investor interest, but one market observer is unmoved. “I think there may be a short-term rebound. But it’s not really Baidu’s problem, it’s a broad-based rebound, and Baidu as a technology stock is naturally going to be more volatile,” said Jason Hsu, founder and chief investor. Rayliant Global Advisors officials said on CNBC’s Pro Talks last week. Baidu is China’s major online search engine operator. The company, which has similar features to Alphabet’s Google, also offers robo-taxi and artificial intelligence-powered tools such as ChatGPT-like Ernie Bot. Xu’s comments to Baidu came as the Chinese market was in the spotlight as the Chinese government announced stimulus measures in hopes of reviving its struggling economy. As of Oct. 25, the blue-chip CSI 300 Index was up nearly 17% so far this year, while Hong Kong’s Hang Seng Index was up about 22%. By comparison, the Nasdaq is up about 25.4% so far this year, while the benchmark S&P 500 is up about 22.5%. The surge in Chinese stocks has some hedge funds and strategists favoring China. However, Mr. Xu, who considers himself a contrarian value investor, has been long and adding to his holdings in China for some time. The portfolio manager oversees the Reliance Quantitative China Equity ETF, which has gained about 21.6% so far this year. Unlike Xu, not everyone is so negative about Baidu. According to FactSet data, 35 of the 46 analysts covering the stock have given it a “buy” or “overweight” rating, with an average price target of $125.41. This leaves the stock with about 40.1% potential upside. BIDU YTD mountain Baidu’s year-to-date share price One of the reasons for Mr. Xu’s skepticism is that Baidu, as an Internet search engine, “is a one-trick pony.” It “doesn’t have the diversification appeal of Google, which is why the price-to-earnings ratios are so different,” he explained. Baidu’s forward price-to-earnings ratio is 8.2 times, while Alphabet’s price-to-earnings ratio is 21.2 times. Xu also believes that Baidu has “largely given up on its AI capabilities” and that many of its AI-driven services have not translated into profit streams for the company. “Baidu had a moment of glory, but… the story of artificial intelligence may come to an end at Baidu, and it will go back to being a one-trick pony.” “There may be a deeper problem, which is that they are in a Niche spaces, they really don’t have the ability to deepen beyond the search space that they dominate, and everything else is based on their brand, not their capabilities. They’ve done that, and brand extensions that aren’t backed by real capabilities really haven’t been achieved. What a result,” he added.
Analysts see room for 40% upside in this Chinese tech stock, but one fund manager is shying away from that prediction | Real Time Headlines
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