Will Baidu Be a Trillion-Dollar Stock by 2030?

Baidu (BIDU -0.64%) was once one of China's hottest tech stocks. The online search and advertising giant's stock hit an all-time high of $339.91 on Feb. 19, 2021 -- which propelled its market cap to nearly $114 billion. That represented a whopping 12,489% gain from its split-adjusted initial public offering (IPO) price of $2.70 per share on Aug. 5, 2005.

Today, Baidu's stock trades at about $92 with a market cap of $33 billion. Its growth cooled off as it faced tough macro and competitive challenges, while high interest rates and the escalating tensions between the U.S. and China compressed its valuations. Could this Chinese tech giant bounce back and become a trillion-dollar stock by 2030?

Image source: Getty Images.

The evolution of Baidu's business

From 2005 to 2015, Baidu's revenue grew at a compound annual growth rate (CAGR) of 74%. Three tailwinds drove that rapid expansion: China's robust economic growth, rising internet penetration rates, and the departure of Alphabet's Google from mainland China in 2010.

But from 2015 to 2020, the company's revenue only rose at a CAGR of 10% as it faced tougher competitive threats. Tencent's Weixin (known as WeChat overseas) became the top "super app" for mobile messaging, payments, and social news. More online shoppers started their product searches on Alibaba's marketplaces instead of Baidu's search engine, while ByteDance's Douyin (known as TikTok overseas) lured away its younger users with its algorithm-driven videos.

Baidu also faced tough macro headwinds during the pandemic as advertisers reined in their spending. China's sluggish post-pandemic recovery, unpredictable "zero COVID" lockdowns, and regulatory crackdowns on the online gaming and education markets (which previously bought a lot of ads across its platforms) exacerbated that pressure. That's why the company generated uneven revenue and adjusted earnings growth over the past three years.

Data source: Baidu. RMB terms. EPS = earnings per share.

Baidu is trying to stabilize its growth with three main strategies. First, it expects to expand its Baidu AI Cloud platform with more cloud infrastructure and generative AI services to offset its dependence on digital ads.

Second, it's diversifying its online marketing business (56% of its revenue in 2023) with Managed Business Pages -- which empower it to handle a client's entire presence across its ecosystem -- to curb its dependence on slower-growth search and display ads. Lastly, it's been expanding its mobile app, which served 676 million monthly active users (MAUs) in the first quarter of 2024, with more integrated features to keep pace with Tencent's Weixin.

What will happen to Baidu over the next few years?

From 2023 to 2026, analysts expect Baidu's revenue to grow at a CAGR of 6% in RMB terms as its earnings per share (EPS) increases at a CAGR of 11%. We should take those estimates with a grain of salt, but they suggest the company's high-growth days are over.

However, Baidu's stock also looks dirt cheap at 10x forward earnings. But like most other Chinese stocks, its valuations will likely remain under pressure unless the U.S. and China can peacefully resolve their differences.

That could be difficult to achieve since a large percentage of Democrats and Republicans are still in favor of passing tougher trade restrictions and higher tariffs against China. If China blockades or attacks Taiwan by the end of the decade, Baidu and its peers could be hit by crippling sanctions and be delisted from U.S. exchanges.

Even if the tensions between the U.S. and China ease, Baidu could still struggle to keep pace with its competitors in the online marketing, cloud, and artificial intelligence (AI) markets. All those challenges could prevent the company from being revalued as a growth stock again.

How much will Baidu be worth by 2030?

For now, we need to assume that Baidu will continue to trade at historically low valuations through the end of the decade. If Baidu stabilizes its business, matches analyst estimates, and continues to grow EPS at a CAGR of 10% from 2026 to 2030, it will generate a profit of 110 RMB ($15.16) per share by the final year.

Assuming Baidu's share count stays roughly the same, the exchange rates hold steady, and its stock still trades at 10x earnings, the stock price could rise more than 60% to $150 by 2030 and boost its market cap to $54 billion. If it trades at 15x earnings, its stock price would rally 145% to $225 and drive its market cap to approximately $81 billion.

Those would be decent returns over the next six years but won't come anywhere close to boosting Baidu's market cap into the trillion-dollar club. Therefore, the company might still be a decent value play on the potential thawing of U.S.-China relations but won't command a higher valuation or become a compelling growth play anytime soon.