Why Baidu Is the Tech Giant That’s Most Vulnerable to a China Downturn
- The search leader’s price multiple is about half its rivals’
- Baidu’s reliance on advertising may cost it in a slowdown
Baidu Inc., after falling well behind China’s two internet giants, looks in danger of losing even more ground if the country continues its economic downturn.
The search giant, which reports results this week, could fare worse than rivals Alibaba Group Holding Ltd. and Tencent Holdings Ltd. because of its higher reliance on the advertising market, an increasingly competitive arena that tends to suffer with economic weakness. Alibaba’s core e-commerce has proven more resilient than traditional retail and a deepening thrust into realms such as cloud services helps juice top-line growth. Tencent is the standout: it’s gained more than 30 percent since an October trough, thanks in part to the cessation of a months-long business-busting freeze on new games.