The United States-China trade war has taken its toll on global markets in the summer of 2019, and many top Chinese firms have been throttled. There seems to be no end in sight to the trade war, but that does not mean you should write off some of these highly attractive equities.
Baidu (NASDAQ:BIDU) is a Beijing-based multinational specializing in internet-related services and products, as well as artificial intelligence. AI is a rapidly growing market and should be a target for growth investors as we look ahead to the next decade. Shares of Baidu have plunged 34.5% in 2019 as of close on August 27. The company released its second quarter 2019 results on August 19.
Revenue beat expectations in the second quarter and Baidu rose back into profitability after its first loss in over a decade. Its video streaming platform iQiyi contributed massively to its revenue growth in the second quarter. Membership climbed 50% year-over-year to 100.5 million in June. Online ad revenue fell 9% year-over-year due to headwinds generated by the ongoing US-China trade war.
The company will seek to improve efficiency in the face of oversupply in the ad market, as well as increased competition. Baidu is also betting big on smart speakers, which are rolling out in autos and other devices. Its Xiaodu smart speaker is poised to capture solid market share.
Shares of Baidu have a favourable price-to-earnings ratio of 15.6 and a price-to-book of 1.5 as of close on August 27. The stock has climbed outside of technically oversold territory, but it still looks discounted today.
