On Tuesday, Baidu Inc. (HKG:09888) shares edged lower 1.92% despite announcing a strategic partnership with China Gas Holdings Ltd (HKG:00384). The two companies have teamed up to drive digital transformation in the energy and power sector.
According to the agreement, both companies will establish advanced digital management systems for the oil and gas company and set up a technology committee that will incorporate industry practices to raise standards.
The companies will utilize emerging technologies like artificial intelligence of things ‘AIoT’, inspection robots, smart energy, and industry apps to help set the standards for carbon emission peaking and neutrality.
The first stage of the partnership is worth RMB 936M (about $144.7 million) and will involve helping China Gas to transition to the cloud. It will use Baidu’s AI capabilities to build apps for smart monitoring, smart scheduling, and gas usage prediction, as well as, offering smart customer services.
Should you invest in Baidu shares now?
From an investment perspective, Baidu shares seem to be trading at an attractive P/E ratio of 7.86, making the stock a compelling option for value investors. Moreover, analysts expect Baidu earnings per share to grow by a whopping 862% this year before rising by a further 21.89% next year.
Therefore, growth investors could also look to add the stock to their portfolio. However, the consistent Chinese government crackdown on technology stocks is a significant headwind for the company’s long-term growth. Analysts expect its EPS to grow at an average annual rate of just 1.65% over the next five years.
Source – TradingView
Can Baidu shares complete a channel breakout?
Technically, Baidu shares seem to be trading within a descending channel formation in the intraday chart. However, the stock has recently surged to trade closer to the overbought conditions.
Nonetheless, it still faces significant trendline resistance, preventing it from advancing towards the 100-day moving average. Therefore, investors can target potential channel breakout profits at about $166.44 or higher at $179.70.
On the other hand, if the trendline resistance continues to hold, thereby triggering a breakout, the stock could find support at $148.55 or lower at $136.05.
Bottom line: a Baidu stock price breakout looks close
In summary, although Baidu shares seem to be facing solid downward pressure, the stock has continued to trade closer to the trendline resistance, indicating an attempt to push the price higher.
Moreover, with analysts expecting earnings per share to soar by a whopping 862% this year, Baidu’s latest strategic partnership could be the catalyst that triggers a breakout.
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