Baidu (BIDU) stock has been volatile in the last five years despite robust earnings and revenue growth. Baidu stock has risen at a CAGR (compound annual growth rate) of just 0.4% in the last five years. In fact, stock returns have declined by 0.9% annually in the last three years.
Baidu stock has returned just 0.6% this year and is down 4% in May 2019. Baidu’s stock is currently trading at $159.58, which is 3.8% above its 52-week low of $153.78 and 44% below its 52-week high of $284.22.
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Is Baidu stock trading at an attractive valuation?
Baidu’s revenue has risen at a compound annual growth rate (or CAGR) of 26% in the last five years. In comparison, the company’s EPS rose at a CAGR of 17% in the same period. Despite sales and earnings growth, Baidu stock has been flat.
So how does Wall Street view Baidu? Is it a safe bet considering the trade wars and a shaky macro environment? Baidu is trading at a forward PE multiple of 14.2x for 2019 and at 16.3x for 2020. In comparison, the company’s earnings are estimated to fall by 18.8% in 2019 and then gain 40% in 2020, which suggests that the stock is overvalued at the 2019 multiple.
Its earnings are estimated to grow at a CAGR of just 2.7% in the next five years, while sales could rise by 16% annually over the next three years.
Wall Street is optimistic about Baidu
Out of 33 analysts covering Baidu, 19 recommend a “buy,” and 12 recommend a “hold.” There are two “sell” recommendations. The average 12-month price target for Baidu is $213.40, indicating the stock is trading at a discount of 34% to average estimates.