Deciding what to do with Baidu stock right now is a bit like standing at a crossroads, looking at a familiar signpost from a fresh perspective. After all, Baidu has been on the move recently, and not just in the headlines. Over the last week, the stock has gained 5.9%, and over the last month, it is up an impressive 10.9%. Even more interesting, Baidu is showing solid year-to-date returns of 15.2%, leaving many investors wondering if this momentum can continue, or if it’s time to lock in gains. That kind of upswing, especially in a tech giant that is well past its startup phase, hints at a potential shift in how the market views Baidu.
Of course, the path has not always been smooth. If we stretch the lens out to one year, Baidu shows a healthy 12.6% gain, but looking even further reveals a mixed story with a -32.0% three-year return and a -22.4% five-year return. The recent tailwind could reflect a renewed outlook for Chinese technology companies, improved clarity around domestic regulations, or continued optimism about Baidu’s innovations in artificial intelligence and search dominance.
For value-focused investors, though, the real story goes deeper than price swings. Baidu presents a robust value score of 5 out of 6, which means it appears undervalued in five different valuation methods analysts rely on. What are these different valuation methods, and what do they really tell us? Let’s break them down one by one, and stay tuned for an even better way to understand Baidu’s valuation at the end.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its expected future cash flows and discounting them back to today’s value. This process gives investors a clearer idea of what the business is worth, based on its ability to generate cash in the future, not just this year but many years ahead.
For Baidu, the latest figures show a trailing twelve months Free Cash Flow of negative CN¥10.4 billion, reflecting recent challenges. However, projections suggest a dramatic turnaround. Analysts expect Baidu’s Free Cash Flow to climb to CN¥27.4 billion by 2028. Further estimates based on extrapolations push this figure to over CN¥33.1 billion by 2035. These expectations illustrate substantial cash flow growth over the next decade, supporting a much higher fair value for the stock.
After crunching the numbers using a two-stage Free Cash Flow to Equity approach, the DCF model calculates an intrinsic value of $152.07 per share. With the stock currently trading at a 37.3% discount to this value, Baidu appears significantly undervalued by this methodology.
Our Discounted Cash Flow (DCF) analysis suggests Baidu is undervalued by 37.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
Approach 2: Baidu Price vs Earnings (PE)
For established and profitable companies like Baidu, the price-to-earnings (PE) ratio is a widely accepted valuation tool. The PE ratio indicates how much investors are willing to pay for each dollar of earnings, making it a practical snapshot for comparing profitability and investor expectations. When investors expect stronger growth or perceive lower risks, a higher "normal" PE ratio is often justified. Conversely, slower growth or higher risks can push it lower.
Baidu’s current PE ratio stands at just 8.6x. Compared to the Interactive Media and Services industry average of 15.3x and the broader peer group at 60.3x, Baidu looks significantly cheaper on this metric alone. However, not all companies deserve the same multiple. This is where Simply Wall St’s Fair Ratio comes in. The Fair Ratio considers more than just basic comparisons; it factors in Baidu’s earnings growth, profitability, market cap, industry dynamics, and risks to arrive at a tailored benchmark. For Baidu, this Fair Ratio is calculated at 15.8x.
Unlike a simple industry or peer comparison, the Fair Ratio provides a fairer expectation of value by blending all the elements that make Baidu unique. By measuring Baidu’s current 8.6x PE against its Fair Ratio of 15.8x, the shares appear meaningfully undervalued using this approach.
Upgrade Your Decision Making: Choose your Baidu Narrative
Earlier we mentioned there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is a powerful yet accessible tool that allows you to connect your personal view of Baidu’s story with the numbers behind it, such as your own estimates for future revenue, profits, and margins. This results in a fair value for the stock that truly reflects your perspective.
Unlike simple ratios or historical data, Narratives help you make investing decisions by linking Baidu’s business story directly to a financial forecast, and then comparing that to the market price. This approach enables you to see exactly how your assumptions would play out in the real world. As a result, you are not just following consensus, but building your own point of view.
On Simply Wall St’s Community page, millions of investors use Narratives to share and update their outlooks as new information, such as news or earnings releases, becomes available. This collective insight can help you decide when it makes sense to buy or sell, depending on how your fair value compares to today’s price.
For example, some investors believe Baidu could reach a fair value of $145.76 if its AI initiatives are successful. Others see only $71.14 due to potential risks. With Narratives, you can clearly see whose assumptions align with your own and make smarter, more personalized decisions.
NasdaqGS:BIDU Community Fair Values as at Aug 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
