원문 보기
the uh, created tremendous number of problems and our portfolios are all about solving problems. Cathie Wood, the CEO and CIO of ARK Invest, has been known for her outrageous price targets on Tesla. Yet, behind the popularity of her bet on Tesla, she has also made numerous successful investments in stocks such as Square, Roku, Invitee, and many more.
Now, Cathie seems to have found an enticing investment that she sees a lot of potential in. Over the past couple of weeks, Cathie Wood, the CEO and CIO of ARK Invest, has been making massive purchases in the one stock. In total, Cathie Wood's purchase totals to $185 million, which signals that she's confident in the growing company.
In this video, I'm going to go over what Cathie Wood's huge bet is and whether you should buy into this stock with massive potential. Welcome to Cash Gains Academy. If you're new to the channel, please consider subscribing for more content like this. Let's see if I can get into it. Instead of waiting until the end to mention the name of the stock, we're going to get right into it.
The stock that Cathie Wood has been purchasing is Baidu. Now, before you have preconceived notions or search this stock up, let me explain why Cathie Wood is purchasing Baidu stock and why personally I have invested over 15% of my portfolio into the stock. Baidu is about to enter an enormous market and is still valued as if the company won't grow significantly.
This video will have five parts. First, we'll start off with an overview of Baidu's business. Second, the potential of Baidu's entrance into a large market. Next, why Cathie Wood believes Baidu will 2x or more. After that, Baidu's valuations and why the stock is undervalued. And lastly, whether the stock is buy right now.
With that out of the way, let's get right into it. Baidu's name speaks for itself, as in Chinese, Baidu means a hundred times. The company runs many different platforms in the technology space. Most notable is Baidu's search engine. Oftentimes, Baidu is regarded as the Google of China. In China, government regulations make it difficult for foreign companies to operate normally.
While Google dominates the US and Europe, Baidu dominates China. In 2010, when Google attempted to enter the Chinese market, Google had repeated cyber attacks and was eventually banned in mainland China on March 30th, 2010. It's safe to say that Baidu will continue to dominate the Chinese market due to its government support.
Additionally, as we've seen with Google, Baidu's competitive moat of having enormous amounts of data prevents other search engines from catching up. Baidu also owns Baidu Maps, which is a mapping service, Baidu Baike, which is an online encyclopedia, Baidu Wangpan, which is a cloud storage service, and Baidu Tieba, which is a discussion forum.
What should be looked at closely in that list is Baidu Wangpan. The AI cloud sector is not a very large market in China right now, but it's projected to grow significantly over the next few years. Between 2018 and 2024, the IDC, or the International Data Corporation, estimates that the AI cloud services market in China will grow 93.6% per year.
93.6% on an annual basis is not something to overlook. This annual growth rate will continue to compound the market size over time. By 2024, the AI cloud services market is estimated to be a $4.5 billion and that's just in China. The leading company in this growing market is, as you might have guessed, Baidu.
In December of 2019, Baidu actually took the lead against Microsoft and Google in an AI natural language processing competition named GLUE. Baidu also owns a company named iQiyi, which is looked to as the Netflix of China. iQiyi alone is worth $16.5 billion. Even though iQiyi has been facing competition from Tencent Video, the company is still projected to grow its revenues by 10% in 2020 and 13% in 2021.
It's no secret that the video streaming sector is accelerating in China and Baidu is projected to take a portion of that pie. Additionally, the Baidu search engine is just going to continue growing in advertisement revenue as more people in the rural areas in China continue to adopt new technologies.
Yet, we haven't even hit on the large sector that Baidu plays a major role in, which is autonomous driving and electric vehicles. Baidu's Apollo Go, which is Baidu's autonomous driving service, has been expanding in China and winning support from China's authorities. In fact, Baidu's Apollo Go was the first robotaxi service to open in Beijing and that's only the start of much more.
In August of 2020, Baidu expanded its robotaxi pilot from Changsha to Cangzhou and is now operating in over 20 cities in China and California. While you could argue about Baidu not being the best in autonomous driving, the winner of the autonomous driving race in China ultimately comes down to who the authorities approve of as the winner.
According to ARK Invest, the Chinese government has already designated Baidu as the nation's autonomous driving platform. The pilot launch speaks for itself. First, to use it, you'll start with the long dominating Baidu Maps, which is where you're going to order your robotaxi ride. Then, you're going to use your phone to scan the QR code that is attached to the back of the front seat.
The vehicle will now drive on its own to the destination. In the video I'm showing here, the rider was able to have the vehicle drive to its destination with no interventions from the driver. This is, of course, a geofenced area, but the fact that Baidu has the ability to launch robotaxis in certain areas is quite appealing.
Over the long term, we should see Baidu begin to steadily roll out its autonomous driving service. The worst case scenario I see is that Baidu's ride-hailing service fails and Baidu sells its data to Google for a huge price tag. The data that Baidu is obtaining through its pilot ride-hailing services are extremely valuable to other companies like Waymo and without a doubt would be purchased for a significant amount of money.
Yet, Baidu's ambitions go even further from there. In 2019, Baidu partnered with Chinese state-owned carmaker FAW Group to launch the Hongqi EV AI-powered taxi. The vehicle is the first mass-produced robotaxi in China. After this, Baidu has officially announced that it is developing an electric vehicle.
In an exclusive Reuters report, Baidu stated that it was talking with other automakers to develop a smart car. The company is considering contract manufacturing a vehicle similar to how NIO is partnered with JAC Motors. As we've seen with NIO, the company has had major success in the electric vehicle space while supplying batteries to JAC and using CATL batteries.
This leads me to conclude that Baidu's entrance into EVs has tremendous potential. Baidu has held preliminary talks with Geely, which owns Volvo, Guangzhou Automobile Group, also known as GAC, and the FAW Group Hongqi. Reuters has reported that Baidu does have a strategic partnership with GAC and further cooperation is being discussed.
We all know how much potential an electric vehicle would have for Baidu. Through the use of Baidu's autonomous driving data, the company's massive cash balance of $33 billion, and its lead in internet data, Baidu easily has the potential to release a compelling electric vehicle. Cathie Wood has stated that she will not buy a stock unless it has the potential to have the stock price go up 15% every year.
In a five-year span, that equates to above a 2x return. In fact, it's evident that Cathie Wood is still building a position in Baidu and has not even finished buying in yet. Because she's not done buying into Baidu yet, we haven't gotten that many statements from Cathie Wood herself. Nevertheless, ARK Invest did release one report on Baidu in August of 2020 written by Tasha Keeney.
In the report, Keeney cited that Baidu's Apollo Go was improving at a fast rate and was an incredible step to fully autonomous taxis. Since we know that Cathie Wood has been buying into Baidu recently and not the previous years, it becomes clear that there are three main factors to Cathie's purchases of Baidu stock.
These three factors are Baidu's Apollo Go, Baidu's entrance into electric vehicles, and the company's appealing valuation. When it comes to Apollo Go, we know that developments have only accelerated rapidly in recent times. On the other hand, Baidu's EV development was even more recent. On December 15th, 2020, Reuters reported that Baidu was looking into electric vehicles.
On the same day, Cathie made the largest purchase into Baidu as she purchased over 470,000 shares. This shows the fact that Cathie sees potential in Baidu's EV sector. And by the way, when I mention Cathie, I really mean the entire ARK Invest, which Cathie Wood is the CEO and CIO of. The last reason for Cathie's purchases into Baidu is the valuation.
As I'm recording this video, Baidu trades for $190 a share. You might think $190 a share is overvalued when you consider that Baidu is up 53% in the past 12 months. Nonetheless, a closer look shows that Baidu is actually extremely undervalued. The industry average for forward P/E ratios in Baidu's case is 31.
Today, Baidu trades at just a 16 P/E ratio. This means that after the next 12 months, assuming that earnings projections are correct and that the current stock price stays the same, Baidu would have a trailing P/E ratio of 16. That right there is incredibly undervalued and minimizes the downside risk to investing in Baidu for the long term.
One of the reasons why Baidu's forward P/E ratio is so low is because of the fact that Baidu search engine had huge growth slow down to just 2% per year in 2020. Additionally, iQiyi was expected to grow faster, but it's faced competition from Tencent Video. These factors and a few others lead Baidu's stock to only have gone up 28% since April of 2011 and actually be down in a 5-year span.
Despite its stock price staying flat over the past decade, Baidu is projected to have its revenue grow 15% in 2021. This is similar to Tesla's 7 years of trading sideways before the massive breakout in 2020. As Cathie Wood says, the longer the base, the bigger the breakout. This trading around this trading range, you as a trader and investor, but I as a trader also, understand that when you build a base like that, one of two things is going to happen.
It's either going to break down and that's what a lot of the bears have been betting on and they've been using every throwing everything at it, or it's going to break out. Clearly, we believe it's going to break out. And the longer the base, you say 5 years, the longer the base, you know, is a the bigger the breakout.
So, we're really looking forward to that. In Baidu's case, the breakout likely doesn't have as much potential as Tesla because the short interest is quite low, but the stock is worth looking into in my opinion. So, what's the conclusion? In my opinion, Baidu is a buy for the long term because of its valuation and massive growth opportunities ahead of it.
However, I'm not a financial advisor and I'm simply just an investor reflecting his thoughts about Baidu. You should always do your own research. I'm interested in hearing your thoughts about Baidu. Let me know whether you are interested into buying Baidu stock. Do you think Baidu will dominate the AI, autonomous driving, or EV sector? Or do you think Baidu will run into major barriers? .
Comments 0