Baidu (NASDAQ: BIDU) likely minted a few millionaires after its public debut in 2005. If you had invested $10,000 in the Chinese tech giant’s IPO, your investment would have briefly blossomed to $1.26 million when it hit its all-time high on Feb. 19, 2021. However, today that 2005 investment would only be worth $389,000.
Baidu’s stock stumbled as it faced fierce competition from other search platforms, the broader Chinese economy sputtered out, and delisting threats cast dark clouds over U.S.-listed Chinese stocks. Despite these challenges, it remains China’s largest search engine, expanding its AI and cloud platforms while being valued at $37 billion.
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So, could Baidu keep growing over the next two decades and turn a fresh $10,000 investment into over $1 million? Let’s review its long-term opportunities to find out.
Exploring Baidu’s Past Growth Trajectory
Between 2005 and 2015, Baidu’s annual revenue soared with a stunning compound annual growth rate (CAGR) of 74%. This growth was fueled by China’s economic expansion, increasing internet penetration rates, and Google’s exit from mainland China in 2010.
However, from 2015 to 2020, Baidu’s revenue growth slowed to a CAGR of 10% due to rising competition from platforms like WeChat, TikTok, and Alibaba, coupled with a deceleration in China’s economic growth. The COVID-19 pandemic further impacted its growth trajectory.
In 2021, Baidu’s revenue grew by 19% in USD terms as certain challenges subsided. However, the following year saw an 8% decline as the complex macro environment constrained growth. By 2023, its revenue rebounded with a 6% increase, driven by the stability of its core online marketing business, expansion of its cloud services, and the success of its Managed Business Pages.
Looking Towards Baidu’s Future
Moving forward, Baidu aims to expand its Baidu AI Cloud platform to reduce reliance on digital ads and enhance its mobile app to compete with WeChat. It also continues to develop its AI capabilities, including the ERNIE large language model, and ventures into driverless vehicles and robotaxi services beyond traditional platforms.
While Baidu remains dominant in China’s search market, shifts in the landscape and the country’s economic trajectory suggest that its high-growth era might be behind it.
Analysts project Baidu’s revenue to grow at a CAGR of 8% from 2023 to 2025, signaling a transition to a more mature tech stock with a 12% growth in earnings per share.
Forecasting Baidu’s Potential Value in Two Decades
Baidu’s current stock valuation at 12 times forward earnings might seem attractive, but sustaining this multiple amid cooling growth could be challenging. If Baidu maintains this valuation and grows its earnings at a stable 10% CAGR from 2023 to 2043, the stock could reach around $650 in two decades.
While this could turn a $10,000 investment into nearly $62,000, it falls short of the past meteoric gains. Baidu now appears more as a steady bet on China’s gradual economic growth, less of a high-flying growth opportunity.
For investors seeking growth, exploring higher-growth peers might be a more viable strategy.