Why Baidu Stock Was Driving in the Fast Lane on Tuesday

Motley Fool
16 Jul
  • Baidu is joining forces with Uber to deploy its Apollo Go autonomous vehicles worldwide.
  • The partnership could represent a significant opportunity for the Chinese tech giant.

Shares of Baidu (BIDU 9.77%) charged sharply higher on Tuesday, surging as much as 9%. As of 12:46 p.m. ET, the stock was still up 8.5%.

The catalyst that sent the Chinese tech giant higher was a high-profile partnership for its self-driving car platform.

Image source: Baidu.

A foot in the door of a worldwide market

In a joint press release, Baidu revealed that it had joined forces with Uber (UBER -1.41%) to accelerate the deployment of autonomous vehicles worldwide. The pair announced a "multi-year strategic partnership to deploy thousands of Baidu's Apollo Go autonomous vehicles (AVs) on the Uber platform across multiple global markets outside of the U.S. and mainland China." The press release went on to say that the focus would be on "increasing the supply of affordable and reliable ridesharing options."

A partnership of this magnitude could be a huge catalyst for Baidu. Uber is widely recognized as the world's leading ride-hailing and delivery platform. For context, the company facilitated 3 billion rides in the first quarter, with more than 170 million monthly active platform customers. Furthermore, the number of both rides and riders continue to increase at a healthy double-digit clip.

Baidu's Apollo Go fleet already numbers more than 1,000 driverless vehicles globally, earning it the title of the world's leading autonomous ride-hailing service.

The first vehicle deployments of the partnership are expected to occur in Asia and the Middle East later this year. "After launch, if a rider requests a qualifying Uber trip, they may be presented with the option to have their trip fulfilled by a fully driverless Apollo Go autonomous vehicle," according to the press release.

Baidu is often called "the Google of China," and search is the company's core business. Baidu has expanded beyond its original mandate into streaming video, artificial intelligence (AI), cloud services, and more, but its stock has been stuck in neutral in recent years. If the partnership with Uber bears fruit, it could mark the next big thing for Baidu.

Like any company based in China, Baidu carries an element of additional risk. That said, at just 9 times trailing-12-month earnings, the stock is attractively priced given the breadth of the opportunity.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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