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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66.93% of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
Important Notice - Scam website
Important Notice - Fraud awareness
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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    Is the Baidu share price a COVID-19 winner?

    Since the COVID-19 pandemic arrived in Q1 this year, the name of the game on the stock market has firstly been to avoid or sell stocks exposed to economic disruption, and seek out companies that will either be unaffected, or preferably may gain in the current environment.

    This should be a relatively straightforward process. But in the case of the Baidu share price, as it is China’s leading search engine company, we have a good example of some of the pros and cons of attempting to catch a COVID-19 winner.

    Learn more about shares trading with ATFX

    There are several key factors applying to the BIDU share price currently, not least of which are its forthcoming earnings. Here we shall see how the company has been able to bounce back - along with the rest of the Chinese economy. The interest here is the way that having been the first into the coronavirus crisis, it was evident that China was one of the first nations to emerge from it.

    The Baidu share price is primarily influenced by the main business of internet search and is online - away from COVID-19, it will be significant how much the fundamentals dipped earlier this year, and how much they have rebounded now. The main metric of concern will of course be advertising revenue. It does not matter so much that Baidu shares may be not directly affected by COVID-19, but more that companies in sectors affected by the pandemic, especially in the travel and hospitality sectors, may be trimming advertising budgets, or even have gone out of business.

     

    Baidu Shares: The TikTok Factor

    The fact that Baidu has 75% of the Chinese search engine market but has seen its revenues decline over recent quarter does flash a warning sign. To have such a dominant position and still be running just to stand still belies a fundamental problem. It is that the growth drivers in non search advertising and especially streaming videos.

    The TikTok phenomenon has been the winning one this year, even though BIDU shares have been supported by its own streaming video unit, IQiyi, which contributes nearly a third of the company’s revenue. Perhaps it could be said that the ideal split distribution in revenues at Baidu would be one third internet search engine, and two thirds streaming video, rather than the other way around.

    In order to avoid the search engine drag on earnings - the consensus for Q3 is 99c a share versus $1.31 last year, it would appear that Baidu will not only have to rebalance its business, it may have to pivot into other areas. Recent news reports have centred on Baidu buying JOYY’s streaming video player platform, something which is essentially a acquiring of growth strategy, while its own short video app, Haokan grows to critical mass. 

     

    BIDU share price: daily chart target

    The Baidu share price has recovered well since the March low of $82, having traded as high as $147 in January just before the pandemic struck. Since March the stock has via a trend channel currently based near the 50 day moving average at $126. Above this support zone the recovery is expected to continue on a technical basis back towards year highs and the analysts consensus price target of $156.

     

    Daily chart showing Baidu share price daily movements for 2020

     

    Looking to learn more about risk management and how it can benefit your trading? Check out our Risk and reward ratio article for more insight.

    Take the opportunity to develop your risk management strategy. Understand five key risk management techniques to help you look after your funds.

    Last Updated: 04/11/2020

    This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


     

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