Baidu’s Investment Value Exceeds that of Google

1 Jul

China’s Internet giant Baidu took up several strategic challenges in the first half of 2014. A few acquisitions that involved huge sums of money will soon reflect positively on the financial reports. The company’s mobile business remains bullish and Baidu also reported better net profit than Google. Overall, in terms of long-term investment value, Baidu’s future looks brighter when compared to Google’s.

The rise of the mobile device industry delivered a chance of major reshuffling to the Internet service market. Baidu has maintained rapid growth in the industry, particularly in the mobile business sector. The total user count for Baidu’s 14 apps has exceeded 100 million and the mobile business has accounted for 20 percent of the company’s total revenue. In addition to its stable search engine business, Baidu is also actively investing in other sectors related to the mobile device industry, mostly in apps involving location-based services, games, music, reading and tourism. The monthly active users at Baidu’s iQIYI.COM and video platform PPS reached more than 94 million, overtaking Youku to be China’s most popular video content website. Those acquisitions were completed in the first half of 2014. Baidu’s earnings in the second half are expected to further improve.

Baidu also invests largely in big data and the “Baidu brain” project; the two areas are expected to drive the company’s future growth. Baidu has started utilizing artificial intelligence in translation and image recognition technology. Image recognition can be used in providing customized search. Commercial image recognition involving online games, medicine, education, finance, e-business and tourism has been introduced. In the coming two years, Baidu will focus on integrated search, cloud-based storage and payment, and transform into a search giant with an integrated service platform.

Baidu’s five-year compound annual growth rate is expected to reach 21.5 percent, and the company’s current price-to-earning ratio (P/E ratio) is 33. Google’s five-year compound annual growth rate is projected at lower than 17 percent, and its profit rate is also lower than that of Baidu. When looking at earning power and growth potential, Baidu’s investment value is arguably higher than that of Google.


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