Baidu, Inc (NASD: BIDU)
Consensus EPS Estimate for FQ3 2019 is $1.17 (-54.20% YoY)
Consensus Revenue Estimate for FQ3 2019 is $3.89B (-3.92% YoY)
EPS Revisions the past 90 days include 4 upward and 8 downward
Revenue Revisions the past 90 days include 0 upward and 14 downward
BIDU is one of China’s online advertising giants, most commonly referred to as China’s Google. It also owns part of IQ (China’s version of YouTube) and part of CTRP (China’s online travel agency giant). BIDU has been investing heavily in AI, cloud infrastructure and autonomous driving to prepare for the future. In September, BIDU announced it would invest $202 million in Neusoft holdings an AI firm focused on helping AI advance in smart cities and the healthcare industry. BIDU’s smart speaker now has 17.3% of the global market share, second behind AMZN’s and now above GOOG’s. BIDU is also considered the market leader in autonomous driving.
In Q1 2019, BIDU posted its first loss since coming public. Shares have been under since then this year and are down -30.88% YTD on worries about China’s slowing economy and newer forms of competition in the Chinese market from social media, mobile apps, and shorter form video platforms.
BIDU reports November 6, 2019, AMC
Analysts are expecting BIDU to report in line with consensus estimates (see above). IQ and CTRP revenues are expected to come in closer to the lower end of their guidance. In September, CTRP announced a secondary offering of 31.3 million shares which represented at the time 30% of BIDU’s position in the company. It is possible that BIDU used some of the proceeds to buy back its shares, thus in our opinion, we do not expect a miss on the consensus earnings estimates.
BIDU now trades at 17xs forward earnings. This is lower than its five-year average and its peers. Zacks rates BIDU a 3 hold with an ESP of 0%.
If BIDU reports in line with its previously guided estimates, we expect the company to hold its ground here and move forward. In our opinion analysts are giving BIDU at this point the benefit of the doubt and expect the shares to be higher one year from today. Trade talk discussions are really what is helping this company and the other Chinese internet stocks. These discussions are reported to be far along and going well per news from this past weekend. Implied volatilities on the BIDU options indicate a possible move up or down of 9.56% (+/- 8.42 points). The stock appears to have broken a downtrend line from drawn its July 1st high. This would imply an upside of $116 to $117, just under its early July high and a downside of $99 to $100.