- Baidu shares moved higher during Monday's session after Mizuho raised its price target to $325 per share – a 20% premium to Friday's closing price.
- Analyst James Lee believes that Baidu's autonomous driving unit could see more growth as China's vision for a smart transportation network crystalizes.
- The stock is moving toward overbought levels in terms of its relative strength index (RSI), but other indicators suggest an extension of its bullish uptrend.
Mizuho analyst James Lee doubled the valuation that it assigned to the company's self-driving unit from $20 billion to $40 billion after noting that China's buildout is becoming clearer. In addition, Lee believes that Baidu is well positioned as the dominant supplier for both the smart transportation network that China is building and in-car technology.
The move follows a similar action from Citi's Alicia Yap, who raised her price target on Baidu stock to $292 per share, citing potential upside from autonomous driving and an upcoming electric vehicle. Yap also noted the recovery in the company's core advertising market.
The global autonomous vehicle market is projected to grow at a 39.47% compound annual growth rate (CAGR) between 2019 and 2026 to reach $556.67 billion, according to Allied Market Research.
From a technical standpoint, Baidu stock broke out from its prior highs in January to fresh 52-week highs. The RSI inched closer to overbought territory with a reading of 69.18, but the moving average convergence divergence (MACD) could see a near-term bullish crossover. These indicators suggest that the stock could see some consolidation ahead, but the intermediate-term trend has turned bullish.
Traders should watch for consolidation above prior highs of around $264.00 over the coming sessions. If the stock breaks down from those levels, traders could see a move toward Fibonacci support at $232.80, but the more likely scenario is a rise over the intermediate term toward fresh highs.
The Bottom Line
Baidu shares moved sharply higher during Monday's session after Mizuho's James Lee reiterated his Buy rating and raised his price target to a Street-high $325 per share. With China's smart transportation network crystalizing, Baidu is well positioned to benefit as a leading autonomous vehicle and in-car technology provider.
The author holds no position in the stock(s) mentioned except through passively managed index funds.