Baidu Stock Has 70% Upside, According to 1 Wall Street Analyst

Baidu (BIDU 5.62%) stock could turn out to be a lucrative buy if a recent analysis of the big Chinese tech company is any indication. One analyst just cut her price target on the shares but still thinks they're quite the bargain. That's because the stock's valuations remain highly attractive, and the company is poised to grow more robustly than the domestic economy.

Price slice on lowered ad revenue projections

In early April Citigroup's Alicia Yap reduced her price target on Baidu stock to $176 from her previous $181. Since the new target remains more than 70% above the latest American Depositary Receipt (ADR) closing price, she maintained her buy recommendation.

The price drop is related to Yap's reduced estimate for ad revenue from companies in several important sectors of the Chinese economy, including real estate -- a particular trouble spot for China these days -- and automotive. While the analyst is still anticipating that Baidu will show ad revenue growth on a year-over-year basis when it reports its first-quarter earnings, that increase should only come in north of 2%.

For the entirety of 2024, the outlook is a little brighter. Yap feels that annual ad revenue growth should outpace China's gross domestic product (GDP) rate. If achieved, that feat should bring some bulls into the stock.

An Asian Google?

Baidu is often called the Google of China, as its foundational business is internet search just like the foundational Alphabet business unit. Like Google, Baidu has managed -- for the most part -- to post very high profit margins thanks greatly to this lucrative activity.

In this country, Baidu is considered by more than a few investors to be a better bargain buy on internet search than Alphabet. Its valuations are significantly lower, after all (for example its five-year PEG ratio is a mere 0.7 compared to its U.S. counterpart's nearly 1.7). There is a degree of geopolitical risk here, though, as U.S.-China relations can be testy at times. Baidu should then be considered only by the more risk-tolerant investors.