MarketBites Daily Investment Commentary: Baidu Announces EVs & Self-Driving Tech I Palantir Finds New Supporters

Stock Market Commentary for 2/22/2021:
  • The Big Picture:
    – Rising Treasury Yields and inflation fears remain the biggest market factors to monitor in the coming week. Last week, the S&P 500 Index declined, as 10-Year Treasury Yields rose from 1.15% to 1.37%. The rise in yields especially hurt high-growth technology stocks, while bank shares gained.
  • Stock Talk:
    The Winner of the Day: Palantir
    Palantir rebounded from its original sell-off after its last earnings call. Scroll down to our second story to see what’s driving Palantir higher!What’s Moving Pre-Market: Prologis
    $PLD continues to rally. Shares have risen 8.3% this month, as the industrial REIT starts to see the benefits of workers returning to the office.

    The Loser of the Day: Churchill Capital IV
    Investors flew to buy $CCIV, as rumors of a deal between them and Silicon Valley electric vehicle maker “Lucid Motors,” appeared close. Traders are now seeing that the firm has less to gain than originally anticipated.

  • The Data Room:
    – Per Johns Hopkins, the U.S. reported 70,585 new Covid-19 cases yesterday. So far, 43.6 million Americans have received their first round of vaccinations.

– By Raymond Kanyo


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Top Investment Story #1: Baidu & Evs

What is Happening?

Chinese search engine giant, “Baidu,” hit an all-time high on Friday. The stock has been making a wild comeback, as Baidu announced a partnership with Geely (owner of Volvo), to launch self-driving EVs within 3 years.

Why does this Matter?

Baidu has been one of the most overlooked Chinese tech stocks for a couple of years now. Its NASDAQ listed shares ($BIDU) lost over 70% from 2018 to the trough, reached in March of 2020. The stock, sold off as the company’s core search-engine (advertisement) business, is threatened by competitors such as TikTok owner “ByteDance.” Yet, it has surged 306% since the selloff. Why?

Baidu has shown growth potential in the hottest market segment: electric vehicles and autonomous driving. In the most recent quarter, Baidu reported a 52% year-over-year growth in its cloud and autonomous driving business. Since they are now partnering with Geely, they hope to bring EVs to the Chinese market within 3 years. These EVs will also leverage Baidu’s self-driving technology called “Apollo” (making self-driving or remote-driven taxis a reality).

So what is the opportunity in Baidu stock?
Investors shouldn’t dismiss Baidu’s search-engine business due to a lack of growth. Baidu generated $3.8 billion [adjusted] free-cash-flow last year, while maintaining a $15 billion cash war chest. Currently, Baidu trades far below pure-play EV stocks, but roughly in line with Google and Alibaba. If Baidu wins the Chinese EV race, or its self-driving technology (Apollo) becomes widespread, the stock can expand.

The Takeaway:

Baidu went from a deep value stock to trading like a high-flying tech firm such as Google or Alibaba, because of its entrance into the EV and autonomous driving space. While there is potential in this space, Baidu has a LOT to prove to justify the 306% increase in stock value.

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– By Raymond Kanyo

– Published in MarketBites Daily Newsletter

Top Investment Story #2: Palantir: Retail & ARK Darling
What is Happening?

Palantir has found new supporters- ranging from Goldman, to Cathie Wood, to Reddit traders. The stock surged 15.22% Friday.

Why does this Matter?

Last week, we covered Palantir’s less than stellar earnings report. What we didn’t see coming however, was an enormous purchase from Ark Invest, a Goldman’s upgrade, and the stock becoming the current focus of retail investors.

ARK Innovation ETF and ARK Next Generation Internet ETF, combined to buy 6,834,900 shares of Palantir last week. The stake was valued at $172M as of Thursday’s closing price. Palantir had been riding a six-day losing streak, as ARK accumulated shares at a nice discount. The firm’s expiring lock-up period flooded the market with increased volumes, a perfect buying environment. CEO and CIO Cathie Wood, suggested that ARK Invest was not concerned with Palantir’s concentration on government contracts and revenues.

Goldman Sachs wasn’t phased by the firm’s earnings either, as analysts lifted the stock’s target price to $34 per share. Goldman highlighted the firm’s long-term orientation and predictability from its defense contracts.

To top it all off, Palantir coincidentally has become the most popular stock amongst Reddit forums in recent days. r/WallStreetBets of $GME fame, received a higher influx of Palantir-related comments than any other ticker last week. Gamestop and Palantir are not alike in the slightest, in terms of business model or short float. Some have accounted the firm’s ties to Elon Musk as a reason for the stock’s popularity amongst retail investors. Others have accredited the firm’s reputation as “Silicon Valley outsiders.”

The Takeaway:

Palantir has seen a vast array of new supporters, despite last week’s earnings debacle and the expiration of the firm’s lock-up period. The stock is up over 340% since its direct listing late last year.

– Written By Jack Dunne

– Published in MarketBites Daily Newsletter

Meet the Authors

Raymond grew up in Budapest, Hungary, where he played tennis for the Hungarian Junior Davis Cup team. At the age of 16, he received the Davis United World College Scholarship, which was established by legendary investor Shelby Cullom Davis, allowing him to attend the Taft Boarding School in Watertown, CT. After Taft, Raymond received a Presidential Scholarship to the Robins School of Business at the University of Richmond, where he studied Quantitative Economics and Finance. Raymond is a CFA Level III Candidate. Prior to joining Taylor Hoffman, Raymond worked at various financial institutions in the insurance, asset management, and financial consulting space. Outside of the office, Raymond enjoys playing tennis at ACAC and Westwood Country Club.

Raymond Kanyo
Product Manager & Investment Analyst

Jack graduated from the Robins School of Business at the University of Richmond with concentrations in Marketing and Finance in 2019. Prior to joining Taylor Hoffman, he worked in high-growth B2B SaaS marketing; assisting Fortune 100 firms to improve their web performance experience. A Long Island New York native, Jack’s hobbies include passionately supporting the Mets and Islanders, and he enjoys skiing whenever he can.

Jack Dunne
Investor Education Specialist
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