Should I Buy Baidu (BIDU)? Finance YouTuber Analysis

The analyst recommends Baidu, highlighting its strong commitment to AI, evidenced by significant R&D investment and leading AI patent applications in China. Despite current analyst expectations for negative revenue growth this year, he believes the company will beat these estimates due to its AI cloud infrastructure and AI-native marketing services, especially with the availability of Nvidia H200 chips, and notes its attractive price-to-sales valuation.

“AI native marketing services up 262% year-over-year. So this is amazing growth within its digital humans within its agents pro programs here for marketing services.”

The YouTuber suggests Baidu as a buy, drawing parallels to Alphabet in its business segments. He highlights Baidu's expected revenue growth of 3.5% this year and 9% next, with EPS up 25% over two years, while trading at less than half Alphabet's price-to-revenue multiple.

“investors are paying a price of 5.6 times revenue for shares of alphabet versus less than half that just 2.2 times revenue for those of Buu.”

Michael Burry has increased his holdings in Baidu, viewing it as an undervalued asset within China's tech sector. Despite past regulatory crackdowns and economic slowdowns, its current deeply discounted valuation and the Chinese government's shift to market-friendly policies present a value opportunity.

“Michael best known of course for predicting the 2008 financial crisis increased his Holdings in Alibaba Buu and jd.com... these stocks are now trading at deeply discounted multiples compared to their historical valuations.”

Baidu is presented as another Chinese tech company trading at a very low valuation, with an Enterprise Value to Free Cash Flow ratio of 5.8. The YouTuber suggests that like other Chinese tech stocks, its depressed price is due to political and geopolitical risks, creating a potential bargain for investors who believe the risk-reward is favorable.

“What about a slightly different business in Buu Enterprise value of 23.15 billion free cash flow of 4 billion a ratio of 5.8 it's all a similar story they're cheap.”

The YouTuber highlights Michael Burry's continued accumulation of Chinese tech stocks, specifically adding 87% to his Baidu position. Despite current macroeconomic headwinds in China affecting consumer spending and leading to significant stock price drops (Baidu down 75% from its peak), Burry likely sees these companies as undervalued. Their strong position in the Chinese economy, coupled with low valuations, makes them attractive for a long-term recovery.

“I think that's what Michael bar sees he puts the value investing cap on his sees these businesses that are very strong in the Chinese economy they're cheap due to the macro landscape so he's going to hold on to them and potentially benefit from a longer term recovery”

The YouTuber notes that David Tepper increased his position in Baidu, which now constitutes about 2.8% of his portfolio. This move is consistent with Tepper's strategy of investing in undervalued Chinese companies during a period of market sell-off.

“BYU is the other one another one kind of in and out of this over the last year or so but now up to about 2.8% of the portfolio.”

The YouTuber recommends Baidu, highlighting its transformation into an AI-focused company since 2016. They point to its Ernie Bot chatbot, plans for third-party AI solutions, and leadership in autonomous vehicle software (Apollo) in China as key drivers for future growth.

“They had completely changed their entire company's operating model in 2016 to focus solely on AI and that work is now starting to pay off.”