Robin Li Yanhong, co-founder and CEO of Baidu in Beijing, China, in October 2018.
Visual China Group | Getty Images
GUANGZHOU, China – Baidu shares rose just below 1% at the company’s opening in Hong Kong on Tuesday.
The Chinese technology giant, which is already listed in the US, has raised $ 3.1 billion in secondary listing in Hong Kong. Shares reduced these gains during morning trades.
Unlike the initial public offerings, the secondary listings cannot be met with massive rallies on the first day, because the company’s shares are already traded on another stock exchange.
Hong Kong listing is an important moment for Baidu, China’s largest search engine. The company had a few difficult years in mid-2018 and lagged behind rivals such as Alibaba and Tencent. Baidu failed to move quickly because Chinese users came to mobile search and a tough advertising market affected the business.
But a change, led by CEO Robin Li, has focused on convincing investors that the technology giant is a leader in artificial intelligence and self-government, in an attempt to diversify its revenue stream beyond advertising. And that seems to be paying off.
In mid-May 2018, Baidu’s US-listed shares closed at $ 284.07 per share, a record at the time. But the stock subsequently fell by more than 70% to a low of $ 83.62 in March 2020 amid the stock market crash. This was the smallest closure since April 2013.
But since the March 2020 low, shares have risen to over 200%. Baidu shares hit an all-time high of $ 354.82 in February.
“I think electric vehicles (EVs) are part of the story. At the same time, cloud computing, AI integration, these are all areas where Baidu has invested heavily since 2014, and we’re just beginning to see the fruits of that work, “KraneShares Investment Director Brendan Ahern told Squawk Box on Tuesday. Asia “.
Baidu has an autonomous driving system called Apollo, which can be sold to car manufacturers. The company started an independent electric vehicle company in partnership with Chinese car manufacturer Geely. Baidu is also testing robotaxi in cities, including Beijing. And last month, the company launched a smart transportation project in the southern Chinese city of Guangzhou.
James Lee, a US and Chinese internet analyst at Mizuho Securities, has a $ 350 price target for US-listed shares of Baidu, which is 31% higher than Monday’s closing price on Wall Street. He said the self-governing business could be valued at $ 40 billion and that the Chinese government will continue to support this industry with favorable policies. Lee also said he expects Baidu’s advertising business to continue to gain momentum in the first quarter of this year.
“We like the fundamentals of the company and continue to expect Baidu’s shares to outperform the market,” Lee told Street Signs Asia on Tuesday.
Meanwhile, Baidu has sought to further diversify its revenue streams. The company has raised money for its Kunlun artificial intelligence semiconductor unit, which is valued at $ 2 billion.