One Reason Baidu (BIDU) Stock is Climbing Today

NEW YORK (TheStreet) -- Shares of Baidu are climbing 1.89% to $203.91 after Volkwagen's (VLKAY) Audi announced that it will enhance connected-car services in China with the country's biggest Internet search engine, Reuters reported.

"We are now taking our next big step in China," Audi CEO Rupert Stadler said at the carmaker's annual shareholder meeting in Neckarsulm, Germany. "The virtual and real worlds are merging."

Volkswagen's flagship luxury brand will integrate Baidu's CarLife, an in-vehicle infotainment platform, into cars. Users can connect their cars and smartphones through wifi or a USB cable, according to the company.

Based on Baidu Maps, CarLife will offer navigation and other related services to help drivers navigate.

Audi and Baidu signed a memorandum of understanding in January and will sign a contract on their partnership at the May 25-27 international Consumer Electronics Show (CES) in Shanghai, Reuters added.

Going forward, Baidu will have to compete with U.S. tech giants like Google (GOOGL) and Apple  (APPL) who have already introduced connected car services like Android Auto and CarPlay, respectively. 

TheStreet Ratings team rates BAIDU INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BAIDU INC (BIDU) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 34.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.47, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.01 is very high and demonstrates very strong liquidity.
  • BAIDU INC's earnings per share declined by 6.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BAIDU INC increased its bottom line by earning $6.01 versus $4.96 in the prior year. This year, the market expects an improvement in earnings ($42.39 versus $6.01).
  • The gross profit margin for BAIDU INC is rather high; currently it is at 62.72%. Regardless of BIDU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.24% trails the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: BIDU Ratings Report

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