We recently compiled a list of the 8 Best Communication Stocks To Buy According to Analysts. In this article, we are going to take a look at where Baidu, Inc. (NASDAQ:BIDU) stands against the other communication stocks.
The communication sector seems to be performing well through this year as the sector ETFs are slightly outperforming the broader market. While XLC and VOX are up over 25% year-to-date as of October 17, the S&P has gained slightly over 23%. Chris Grisanti, chief market strategist at MAI Capital Management also sees significant opportunities in the tech and communications sector despite him being a value investor.
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He told CNBC on October 17 that the economy appears to be in very strong shape, with positive earnings reports from financial companies. Economic indicators are looking solid, and the upcoming election could have a positive effect regardless of the outcome. Moving forward, the strongest earnings are likely to come from technology and communication stocks, despite them typically being outside value-focused investments.
Adapting to Consumer Behavior in Media and Telecom
According to PwC’s Media and Telecommunications: US Deals 2024 Midyear Outlook, media and telecommunications deal activity remained subdued due to high interest rates and uncertain regulations, with deal volumes declining despite a slight rebound in values in 1H 2024. Consumer preferences are shifting towards short-form, user-generated content platforms like TikTok, where influencers play a significant role in attracting brand partnerships. Streaming platforms are evolving through bundling and partnerships to manage rising content costs while improving subscriber retention.
AI, especially generative AI, is increasingly influencing content creation and ad tech, which are making campaigns more efficient and optimizing ad spending. Private equity investors are showing renewed interest, especially in consumer-focused deals, although regulatory obstacles and privacy concerns continue to complicate the market. As companies navigate these challenges, maintaining a strong consumer value proposition is crucial to retaining subscribers and driving growth.
Our Methodology
For this article, we identified over 40 communications services stocks with a market cap above $10 billion through the Finviz stock screener. Next, we narrowed our list to 8 stocks most favored by analysts. We listed the stocks in ascending order of their average price target upside as of October 17. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A modern internet space with a person using Baidu services on a laptop.
Baidu, Inc. (NASDAQ:BIDU)
Average Price Target Upside: 40.33%
Number of Hedge Fund Holders: 42
Baidu, Inc. (NASDAQ:BIDU) is a Chinese tech company focused on AI, cloud computing, and internet services, with a strong presence in the search engine market. It has advanced AI with models like ERNIE Bot and ERNIE 4.0, which enhance its products. It takes the 2nd spot on our list of best communication stocks according to analysts.
It is also the parent company of iQIYI, an OTT streaming platform which is often called the “Netflix of China.” It generates revenue mainly through subscriptions, although advertising also plays a role. Despite strong competition in China’s streaming market, iQIYI remains a key player due to its brand recognition and large user base.
While Baidu’s (NASDAQ:BIDU) stock price performance has been underwhelming in the current year, it is a fundamentally strong company with strong growth potential. While its online advertising revenue is still weak, its AI Cloud business is growing rapidly, and its autonomous driving segment shows long-term growth potential.
Despite the the decline in search engine revenue, the company still holds over around 56% of the market share in China as of September according to GlobalStats stat counter.
Even though Baidu’s (NASDAQ:BIDU) stock is still in a downtrend, it shows signs of recovery. Despite its challenges, it remains undervalued with a forward price-to-earnings multiple of 8.22x, which shows a nearly 39% discount to its sector median.
Overall BIDU ranks 2nd on our list of the best communication stocks to buy according to analysts. While we acknowledge the potential of BIDU as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BIDU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.