uploads/2020/05/Baidu-shares.jpg

Baidu Shares: Insights for Investors amid Delisting

By

Updated

Baidu (NASDAQ:BIDU) is one of China’s biggest technology companies. The company dominates the online search market in China. Baidu shares took a hit in the first quarter of 2020 alongside other Chinese stocks. The coronavirus outbreak disrupted business in China and around the world. At $103 per share, the company has pulled up 26% from its pandemic lows of $82. However, Baidu shares still trade at a 30% discount to their 52-week high at $147.

Here are two things anyone considering investing in Baidu shares needs to know.

Article continues below advertisement

Baidu captures 30.9% of China’s smart speaker market

Baidu derives most of its revenue from advertising. As a result, the company’s share price tends to track the performance of the advertising business.

However, the company’s advertising revenue fell 19% YoY (year-over-year) in the first quarter due to the coronavirus and tough competition. Since the advertising market tightens with the competition, Baidu has sought to diversify to other industries. For example, the company has ventured into the cloud computing and hardware businesses. In hardware, Baidu makes smart speakers, which gives it a foothold in the fast-growing hardware category. The category could hit $23.3 billion in 2025.

Baidu captured a 30.9% share of China’s smart speaker market in the four months through April. Alibaba topped the chart with a 35.2% market share, while Xiaomi was third with a 30.4% market share.

The revenue from Baidu’s non-advertising businesses, like smart speaker sales, jumped 28% YoY in the first quarter. Meanwhile, the non-advertising division contributed 36% of the company’s total revenue from 28% in the previous quarter. Baidu shares rose almost 8.0% following the big jump in non-advertising sales.

Baidu delisting from US exchange

The company might join Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD) and list its shares closer to home. Last year, Alibaba listed its shares in Hong Kong and raised $13 billion in the process. JD.com is working on listing its stock in Hong Kong as soon as next month. JD.com’s Hong Kong listing could raise as much as $3.0 billion in additional cash for the company.

Alibaba maintained the US listing of its stock even though it listed in Hong Kong. JD.com will likely do the same. However, Baidu has been considering a major shift. According to Reuters, Baidu has been looking at delisting from the US exchange to relist in Hong Kong or somewhere closer to home. The company’s management said that the shares are undervalued in the US. At this point, Baidu shares have fallen 18% for the year.

Advertisement

More From Market Realist