Baidu (BIDU) shares have been on fire, skyrocketing about 150% over the past six months, compared with a 16% rise in the S&P 500 index during that span. This includes 30% returns just over the past 30 days. After languishing over the past eighteen months, it seems the market is finally ready to reward Baidu for consecutive quarters of strong earnings that has boasted tons of cash flow. But can it continue?
The Chinese tech giant is set to report fourth quarter fiscal 2021 earnings results after the closing bell Wednesday. Baidu’s out-performance might be just the beginning as the Chinese tech giant is reportedly in early developments of a stand-alone artificial intelligence (AI) semiconductor company. Citing a current chip shortage, reports suggests Baidu wants to leverage its existing AI-based platform-as-a-service capabilities to sell chips to customers in various industries including banks and automakers to help them manage applications without having to build their own platforms.
Investors have also become more excited about Baidu’s growth prospects as the company recently announced a new mobility-as-a-service (MaaS) autonomous driving platform. Reports suggest Baidu, which has amassed some forty autonomous vehicles in its fleet, will allow customers to order transportation services on demand by leveraging various robotaxis and robobuses. Citing the company’s advanced AI technology and strong regulatory support from the Chinese government, analyst Ella Ji of China Renaissance assigned a price target of $325 on the stock.
Elsewhere, investors will also focus on Baidu’s existing businesses, namely Baidu's marketing division which is expected to rebound stemming from the recovering online advertising market. What’s more, the so-called U.S. and China tech war may begin to de-escalate under the Biden administration. All told, there is now plenty of optimism that Baidu’s collective businesses will emerge stronger in the quarters ahead. These, among others, will be an important topic analysts will ask about during Wednesday’s conference call.
In the three months that ended January, Wall Street expects the Beijing-based company to earn $2.61 per share on revenue of $4.65 billion. This compares to the year-ago quarter when earnings came to $3.76 per share on revenue of $4.13 billion. For the full year, earnings are expected to rise 27% year over year to $9.38, while full-year revenue of $16.57 billion would rise about 8.2% year over year.
The recent rise in Baidu coincides with rising estimates. Over the past six months several Chinese stocks were under threat of being delisted on U.S. stock exchanges at which point Baidu’s full-year profits were expected to decline 12% year over year to $6.39. The upbeat full-year forecast is nonetheless a welcome sign that analysts believe the company has overcome the disruption in its digital ad business that was brought on by the coronavirus outbreak.
Baidu generates roughly 60% of its revenue from its online marketing. In the third quarter Baidu reported better-than-expected quarterly earnings and revenue, driven by increased ad spending on its internet search platform which rebounded strongly from the pandemic-induced lockdowns. Third quarter revenues rose 0.5%, reversing a downtrend. Q3 adjusted profits more than doubled to about $1.125 billion, driven by 22% decline in content costs, traffic acquisition costs and costs of good sold. Investors will want to see these positive metrics continue on Wednesday.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
In This Story
BIDUOther Topics
Stocks Technology
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
Read Richard's Bio