Here are four reasons why you should buy Baidu!

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In recent years, AI stock $Baidu(BIDU)$ $BIDU-SW(09888)$ hasn't been getting much love from investors, with its share price plunging over 70% from its highs three years ago. However, all risk is basically priced in now, and the company's fundamentals are still solid.

When the bad news is all out, good news is just around the corner. And believe me, now is the perfect time to jump on this former growth star. Here are four reasons why:

1.Baidu is a bargain!

Baidu ticks all the boxes for value investors. While tech giants in the US are seeing their valuations skyrocket, Baidu is trading at a mere 13 times its earnings. And if you look at adjusted earnings, that number drops to just 9! Compare that to $Alphabet(GOOG)$ $Alphabet(GOOGL)$ , which is trading at a whopping 26 times its earnings.

Based on revenue, Baidu's enterprise value is 1.3 times last year's revenue, compared with 5.8 times for Alphabet. The point is not that Alphabet's valuation is too high, but that Baidu's is way too low!

2.Performance continues to exceed expectations

Baidu not only has a low valuation, but adjusted earnings continue to far exceed Wall Street expectations. In every quarter of 2023, Baidu beat earnings estimates by at least 23%! And despite all that good news, the stock is actually down a bit since the start of 2023!

Analysts expect the company to report adjusted earnings of $11.06 per share in 2024 and $12.20 the following year. If Baidu keeps up the trend, it is going to start moving up, or its trailing P/E is going to drop below 7!

3.It's still innovating like crazy!

Baidu is not just a search engine with a lot of cash - it's actively investing in emerging tech like machine learning, computer vision, and robotics. It's even a pioneer in autonomous driving.

What Baidu lacks now is high growth. The last time its revenue grew over 20% was back in 2017, and last year it was just 9%. But if those tech investments start paying off and translating into earnings, a return to high revenue growth and a surging stock price will not be a problem.

4.A headwind can turn into a tailwind

Investing in international stocks has its own risks, but geopolitical risks are fickle, today's headwind could be tomorrow's tailwind.

Baidu is in a solid position with its valuation at historic lows and plenty of cash. Its enterprise value, after subtracting net cash from its $36 billion market cap, is less than $24 billion.

In one sentence, Baidu is well suited to contrarian investing.