PreMarket Prep Stock Of The Day: Baidu

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

Long before the COVID-19 pandemic, there were companies from both the U.S. and China that were in a steep downtrends. The PreMarket Prep stock of the day is a Chinese company that's adding to its extended decline: Baidu Inc. BIDU. 

What Baidu Does 

Once hailed as the Google of China, Baidu is one of the largest artificial intelligence and internet companies in the world. The tech multinational specializes in AI and internet-related services and products.

Rough Sledding For Baidu Since May 2018 

From its August 2016 low ($100), Baidu rallied nearly 200% when it peaked May 2018 at $284.22. As the trade war with China began to ramp up, shares of the issue came under selling pressure.

Management concerns regarding the company began on May 18, 2018 with the announcement that COO Qi Lu was stepping down.

Speculation that Google was going to enter the Chinese market exerted more selling pressure on the issue in September and October of that year. 

The bottom finally fell out in May 2019, when a second-quarter miss knocked off 17% of its price, with the issue falling from $153.70 to $128.31 on May 17.

Baidu's rebound in January of this year ended abruptly at $147.38 and did not find a bottom until it reached $82 on March 18. That low coincided with a pair of monthly lows at the $83 area from March and April of 2013.

Triple Whammy Halts Baidu's Rebound Off Recent Low

Accounting concerns that obliterated the share price of Luckin Coffee Inc- ADR LK and put a dent in the recent rally of TAL Education Group TAL, have investors fleeing from China-based companies.

In addition, a short report on IQIYI Inc IQ by Muddy Waters and Wolfpack Research has that issue deep in the red in Wednesday's session. Baidu has a 58% stake in the company. 

Finally, Reuters reported that Chinese internet regulators have ordered Baidu to clean up improper content on its site has added to its misery in today's session.

The stock was down 5.93% at $95.75 at the time of publication Wednesday. 

Baidu Moving Forward

One general rule of thumb for long-term investing is to first to be cognizant of the overall trend in the broad market. Also, attempt to buy strong stocks on declines and sell into strength.

Baidu does not meet any of this criteria. It was trending down in a raging bull market and has continued lower with the weakness in the broad market.

For those attempting to pick another bottom in the issue, a breach of the $82 low may be a signal for the continuation of lower prices.

Photo by hwanghsuhui via Wikimedia.