• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Baidu Stock Continues Bull Run as Trade Optimism, Strong Earnings Spark Surge

The Chinese tech giant is charging hard to close August, adding hope for bulls betting on an inflection point.
By KEVIN CURRAN Aug 20, 2019 | 08:52 AM EDT
Stocks quotes in this article: IQ, GOOGL, BIDU

Baidu (BIDU) , the Alphabet  (GOOGL) of China, says the bad news is beginning to come to an end, significantly shifting sentiment on the Street.

Shares of the Beijing-based tech giant have run nearly 20% this week, building on a more optimistic tone in trade talks and earnings results that have suggested much of the pain has already been priced in.

"In the recent months, faced with severe external challenges and a weak macro environment, the company initiated a series of transformative changes, including organizational structure, personnel, and business consolidation," CEO Robin Li said in a letter to employees. "These changes have brought temporary pain, but the positive impact will be far-reaching, enabling a more solid and long-lasting future for Baidu."

The idea of the temporary tamp being just that, temporary, and earnings that beat strongly on top and bottom lines and showed positive user growth has quickly reversed share trajectory after the stock was more than halved in the past year.

Looking to the road ahead, CFO Herman Yu encouraged yet more optimism for long term shareholder that have been among the most hurt by the trade tensions and "growing pains" in the business.

"Our emphasis on improving search and feed monetization is in progress, we witnessed double-digit sequential revenue growth in the second quarter and expect further sequential growth into the third quarter," he told analysts. "Our focus to diversify away from traffic and grow search revenues to in-app search and feed is proving to be a dominant search model and in-app services allow us to gain more user insight across mass domain of knowledge, content and services and continuously improve our user engagement for both Baidu and our marketing services customers."

He added that progress in AI is significant and should open more shareholder value in the future as users continue to come to the platform and the prospects of autonomous driving become more prescient.

"On Baidu's AI businesses, DuerOS voice assistant continues to experience strong momentum with installed base surpassing 400 million devices," Li said. "As mobile internet penetration in China slows, we are excited about the huge opportunity to provide content and service providers a cross-platform distribution channel beyond mobile, into smart homes and automobiles."

He noted that even amidst the slower environment, the daily active users on the platform increased by tens of millions in the major population center.

"We believe Baidu Core demonstrates strength in user acquisition and drives engagement and ROI through mini-programs and structured data initiatives in medical," Jefferies analyst Thomas Chong commented. "With the shares down 30% YTD, macro-headwinds and competition look priced in."

As a result, he still sees shares undervalued at the potential inflection point at present, causing him to reiterate his "Buy" rating on the stock.

Still, with no firm end in sight to the ongoing trade war and weakness in the company's iQiyi (IQ) video streaming subsidiary and the need for sustained spending in the current environment, there is room for caution on the Chinese company.

"While the share price might react positively to the print on profit beat, we remain fundamentally cautious on Baidu's ads outlook in 2H19," J.P. Morgan analyst Alex Yao warned. "We have identified no solid evidence to support the widely held optimism of an online ad recovery in 2H19. We therefore think it is too early to look through 2019 and to bottom-fish Baidu given the low visibility for its core ad revenue recovery and potential further estimate cuts in 2H19."

Indeed, while the Wall Street consensus remains a "Buy", price targets have been cut across firms as many remained unconvinced that macro worries and slowdowns in certain segments are suddenly rolling off.

At the very least, there is reason not to chase even for contrarian investors looking to cash in on the other end of the trade war.

(Alphabet  is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GOOGL? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Earnings | Investing | Stocks | Software & Services | Technology | Technology Hardware & Equipment | Advertising | China | Analyst Actions | Stock of the Day

More from Stocks

Shares of General Motors Could Begin to Bottom Out

Bruce Kamich
Jul 7, 2022 1:11 PM EDT

Here's the area where a rally is possible.

You Could Say I'm 'Fed' Up With These June Minutes

Jim Collins
Jul 7, 2022 12:30 PM EDT

From one logic-defying FOMC statement to the next, I'm not sure what I'm even reading at this point. But I do know how I'm investing.

As Harmony Biosciences Breaks Out to a New High, What's Next?

Bruce Kamich
Jul 7, 2022 12:20 PM EDT

Here's where traders could go long.

7 Biotech Stocks I'm Buying As They Lead a Market Bounce

James "Rev Shark" DePorre
Jul 7, 2022 11:56 AM EDT

It has been a mistake to trust momentum to last in this environment.

Here's Where Shares of Walmart Are Attracting Buyers

Bruce Kamich
Jul 7, 2022 11:45 AM EDT

Only nimble traders need apply.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:41 AM EDT STEPHEN GUILFOYLE

    Reweighting Portfolio Positions Through 5 Trades

    Check out what we're doing in the TheStreet's Stoc...
  • 12:01 PM EDT PAUL PRICE

    A Recent Director Buy in Children's Place (PLCE)

    Four of the most recent insider trades in Children...
  • 07:34 AM EDT PAUL PRICE

    A $525,000 Vote of Confidence on Macerich (MAC)

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login