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Baidu, Inc. (NASDAQ:BIDU) Stock Undervalued

$BIDU #China #USA #Nasdaq #Stocks #ShayneHeffernan #Undervalued

Baidu joined the growing list by announcing plans to train five million AI developers by 2025

Baidu
Ticker: NASDAQ:BIDU
Price: $121.29
Recommendation: Buy
Target Price: $142.20

Company News

Chinese AI and search conglomerate Baidu (NASDAQ: BIDU) joined the growing list by announcing plans to train five million AI developers by 2025 while deploying an equal number of AI cloud servers across its 10 datacenters by 2030.

Beijing’s infrastructure initiative “will be the new driver for China’s economic development in the coming decades, and emerging technologies such as AI, cloud computing, 5G, IoT and blockchain are its key technological pillars,” said Baidu CTO Haifeng Wang.

“As an AI platform company, Baidu will use its many achievements and years of practical experience in AI technology to help speed up the development of new infrastructure and facilitate implementation of AI so that all industries can leverage it for unprecedented new momentum.”

The Beijing-based tech titan notes that its goal of five million AI cloud servers amounts to about half of global shipments during 2019.

Considered China’s leading AI developer, Baidu touts its PaddlePaddle deep learning platform used to develop AI applications delivered by Baidu Brain via Baidu Cloud, China’s largest public cloud service. As is its AI cloud.

Along with more than 10,000 worldwide AI patents, Baidu claims the largest number of Chinese patents in areas ranging from speech recognition and natural language processing to knowledge graphs and self-driving vehicles.

It also claims a growing list of AI chip sets, including its Kunlun chip for industrial applications and its Honghu voice chip. Baidu recently announced a manufacturing deal with Samsung Electronics (KRX: 005930) to begin manufacturing the Kunlun cloud-to-edge AI chip earlier this year.

Beyond technology development and infrastructure deployment is the emerging issue of nurturing AI talent. China is pouring vast resources into training the next generation of AI developers, and Baidu said it is funding deep learning and other AI courses at China’s top university.

A recent study tracking global AI talent found the U.S. nevertheless maintains a large lead in cutting-edge AI research, with nearly 60 percent of leading AI experts working for U.S. companies and universities. By far the largest employer is Google (NASDAQ: GOOGL), whose Google Brain and DeepMind units accounted for more than 90 scientific papers during last year’s Conference on Neural Information Processing Systems.

Researcher MacroPolo, which tracks Chinese economic development, noted in its AI study that many top researchers at U.S. companies and universities are immigrants. The majority are Chinese researchers who come to the U.S. to study and work.

Source: MacroPolo

“Without researchers from abroad, America’s lead on [AI] talent would likely be considerably diminished,” MacroPolo concluded in its recent analysis of AI conference research papers. (The think tank’s “AI talent tracker” is here.)

Based on where AI researchers earned their undergraduate degree, the analyst found that 29 percent come from China while only 20 percent earned degrees at U.S. universities.

By contrast, the vast majority of Chinese AI Ph.D students—88 percent—work in the U.S. after completing graduate school, MacroPolo reported.

After Google, the top five institutions for AI research are Stanford University, Carnegie Mellon University, Massachusetts Institute of Technology and Microsoft Research, in that order. Only two Chinese institutions, Tsinghua University and Peking University, are among the top 25, according to the MacroPolo study.

The technology analyst noted that U.S.-China trade and technology tensions along with the pandemic has fueled proposals limiting U.S. immigration, a move that analysts warn could threaten the China AI research pipeline. For example, proposed legislation would eliminate visas for Chinese graduate students working in STEM fields. Another bill would suspend a U.S. program that allows foreign students to work in the U.S. for up to three years after graduation.

The current U.S. lead in AI research “could be disrupted by policy decisions that put a halt to, or even reverse, these global flows,” the AI study concluded. “Such decisions could have the unintended consequence of providing more opportunities for other countries—both U.S. allies and competitors—to absorb this highly mobile pool of AI talent.”

Business Summary

Baidu, Inc. is a Chinese language Internet search provider.

The Company offers a Chinese language search platform on its Baidu.com Website that enables users to find information online, including Webpages, news, images, documents and multimedia files, through links provided on its Website.

In addition to serving individual Internet search users, the Company provides a platform for businesses to reach customers.

Its business consists of three segments: search services, transaction services and iQiyi.

Search services are keyword-based marketing services targeted at and triggered by Internet users’ search queries, which mainly include its pay-for-performance (P4P) services and other online marketing services.

Its transaction services include Baidu Nuomi, Baidu Takeout Delivery, Baidu Maps, Baidu Connect, Baidu Wallet and others. iQiyi is an online video platform with a content library that includes licensed movies, television series, cartoons, variety shows and other programs.

Shayne Heffernan Trade Idea

“Our current price target of Baidu will come in around $142.20 giving the stock a price increase of +17.24%.”

Price Performance

Relative Valuation

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 112.53.

The projected upper bound is: 130.12.

The projected lower bound is: 113.11.

The projected closing price is: 121.62.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.

An on-neck line occurred. This is a bearish pattern where prices should move lower when the white candlestick’s (i.e., the most recent) low is penetrated.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 52.0263. This is not an overbought or oversold reading. The last signal was a sell 12 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 60.04. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 68 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 6. This is not a topping or bottoming area. The last signal was a sell 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.

Rex Takasugi – TD Profile

BAIDU INC ADS closed down -0.510 at 121.290. Volume was 59% below average (consolidating) and Bollinger Bands were 14% narrower than normal.

Open     High      Low      Close     Volume
121.010  122.350   118.520  121.290   2,045,713
Technical Outlook
Short Term:        Neutral
Intermediate Term: Bullish
Long Term:         Bullish
Moving Averages: 10-period     50-period      200-period
Close:           122.60        108.33         113.56
Volatility:      35            50             54
Volume: 3,543,522 4,699,557 4,259,779

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

BAIDU INC ADS is currently 6.8% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods.

Our volume indicators reflect volume flowing into and out of BIDU.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on BIDU.O and have had this outlook for the last 27 periods.

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