BIDU is approaching its all-time high of $189.34 from March 7th (when many growth/momentum stocks topped). The stock’s impressive recovery from its early April low near $140 has been quite steady since mid-May:
The stock has not spent much time above the $180 level since December, but this move seems to be built on more solid ground given the base that formed in the spring. On the weekly chart, we can see the long-term relevance of the $140-$150 support area as well as the recent $180-$190 resistance area:
BIDU is now up 5% on the year, and the stock’s move over the past couple of months has been bolstered by favorable fundamental business growth as well. Here is GS Research on the strong Q1 site metrics from an early June report:
Paid clicks grew 53% yoy in 1Q14 from 22% in 1H13, 44% in 2H13—its quickest pace since the 64% yoy growth in 2011. Baidu’s 1Q14 paid click grew about twice as fast as Google’s run-rate of 26%. Yoy growth in paid clicks has accelerated from the modest +30% in 2013 and -15% in 2012. We attribute the acceleration in paid clicks growth at Baidu to the increase in mobile search users, which have grown to 160mn from 130mn two quarters ago, and the successful expansion of Baidu’s Partner sites. We believe PC search growth, too, has been positive for technology improvement, while mobile traffic should attain traffic parity with desktop search by year-end.
Cost per click (CPC) growth was “faster” as Baidu’s investments in deep learning and natural language processing have enhanced monetization effectiveness. Higher click- through has led to improved ROI among advertisers, driving cost-per-click and paid click coverage increases across platforms.
BIDU has benefited from the catch-up in Internet usage in China vs. the rest of the world (as shown by the BIDU / GOOG comparison). That secular trend remains in BIDU’s favor, though the main question for BIDU here on the fundamental side is the appropriate valuation. The technical situation has more relevance until the late July earnings release.