Baidu Hong Kong stock: Buy or sell?
Headquartered in Beijing, China, Baidu Inc. (NASDAQ: BIDU, HK: 9888) is the largest search engine provider in China and one of the biggest tech conglomerates globally.
Often hailed as China’s Google, those who invest in Baidu Hong Kong stock own a company that controls 84.34% of the search engine market share in China’s mainland across all platforms (as of February 3, 2022). It is the second largest search engine platform in the world.
As well as the Baidu Hong Kong stock listing, the company is also accessible to investors in the United States through the Baidu ADR which is listed on the NASDAQ (NASDAQ: BIDU).
Robust EV operations
The company has been actively developing its automotive business segment through product launches and joint ventures. Baidu launched its robotaxi service ‘Apollo Go’ in Shenzhen late last week, marking the availability of its self-driving taxi service in major first-tier cities in China. This is in line with the company’s plans to expand Apollo Go’s operations to 65 cities by 2025 and 100 cities by 2030.
Last year, Baidu partnered with carmaker Geely to create a standalone electric vehicle unit Jidu, which is set to operate as an independent subsidiary of BIDU. Baidu, which has a majority stake of 55% in the joint venture, will focus on developing the software and technology of the vehicles by leveraging its experience in autonomous driving technology.
With the increasing demand for EVs and autonomous driving technologies, BIDU’s burgeoning presence in this space is expected to fuel its long-term growth prospects.
Baidu Hong Kong stock investors must consider immense competition
The Chinese tech trio – Alibaba, Baidu, and Tencent (BAT) are scurrying for dominance amid the rapid digitization of virtually every industry. Amid the rising popularity of apps and mobile-based search engine platforms and the slowing advertising market, Baidu’s primary desktop-based search engine platform and advertisement revenues faltered in 2019.
Super apps such as ByteDance’s Tiktok and Tencent’s WeChat have emerged as significant competitors of Baidu in recent times. Regarding this, a China Renaissance article said, “For the long-term, we believe the build of Baidu’s mobile ecosystem is still challenging given large mobile apps are all closed system, and it is hard to index the content.”
As the race for market dominance intensifies, Baidu has been diversifying its operations to retain and expand its client base. However, given the highly competitive Chinese tech space, the search engine platform’s growth prospects seem uncertain.
Being one of the biggest tech companies in China, Baidu failed from the country’s regulatory watchdog. The company was fined RMB500,000, the maximum under China’s Anti-Monopoly Law in November last year, for fainting to disclose multiple deals. Failure to disclose acquisitions dating back to 2012 resulted in the imposition of such a fine.
Moreover, government-mandated restrictions on advertisement revenues, a significant income source for the company, caused its earnings to decline over the past three years.
Bottom Line for Baidu Hong Kong stock
Baidu is one of the most innovative tech companies globally, dominating the world’s largest internet market with more than 765 million users. In the wake of the rising popularity of alternative tech platforms and super apps, Baidu has been venturing into other avenues to diversify its income stream, thereby securing its revenue and income streams.
However, the increased government scrutiny, particularly in the tech industry, is a significant deterrent for Baidu. Also, amid the hawkish interest rate backdrop and volatile markets, Baidu is best avoided now.
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