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A Look at Baidu’s Valuation in 2019

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BIDU is trading 39% below its 52-week high

Shares of Chinese (FXI) Internet search company Baidu (BIDU) have fallen 25% in the last 12 months. The last year has been particularly brutal for Chinese stocks due to the US-China trade war and concerns about slowing domestic growth. The tech sell-off in the last quarter of 2018 also contributed to this decline.

Baidu stock is currently trading 39% below its 52-week high of $284.22 and 13% above its 52-week low of $153.78.

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Is Baidu undervalued?

Baidu has a forward 2019 PE ratio of 28.2x. For 2020, this ratio is 19.0x. Analysts expect Baidu’s sales to rise 16.6% in 2019 and 16.5% in 2020. Its EPS are expected to fall 13% in 2019 and to rise an impressive 36% in 2020. Its EPS could grow at a compound annual growth rate of 2.8% over the next five years.

Baidu stock looks overvalued if we take into account its expected negative earnings growth in 2019. It is, however, undervalued considering its expected earnings growth of 36% and its PE ratio of 19.0x for 2020.

Analysts’ recommendations

Of the 33 analysts covering Baidu, 19 have given it “buy” recommendations, 12 have given it “holds,” and two have given it “sells.” The average 12-month target price for Baidu is $216.46, which indicates a potential upside of 25% from its current level.

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