Chinese internet giant Baidu (NASDAQ:BIDU) is scheduled to report its second quarter Fiscal 2023 results on August 22, before the market opens. Analysts remain highly optimistic about Baidu’s long-term stock trajectory, even while short-term headwinds continue to haunt its performance.
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Here’s What to Expect from Baidu’s Q2
The Street expects BIDU to report adjusted earnings of $2.31 per share on revenues of $4.57 billion. In the prior-year quarter, Baidu posted adjusted earnings of $2.36 per share on revenues of $4.43 billion.
Baidu’s early foray into the generative artificial intelligence (AI) space in China puts the company in a pivotal role. Even so, rising competition from the likes of (NYSE:BABA) and Tencent (OTC:TCEHY) continues to eat away at market share. Overall, the weak macroeconomic backdrop in China, alongside the expectations of sluggish growth going forward, has put several Chinese companies’ futures under pressure.
Nonetheless, Baidu’s Advertising segment is expected to have performed well in Q2, with sectors such as travel, healthcare, bin services, and local services expected to have picked up pace after the Chinese New Year. CEO Robin Li pointed out this upward momentum during the Fiscal Q1-2023 conference call.
Meanwhile, Baidu’s AI Cloud segment is expected to see a slowdown in growth year-over-year with lesser funding from government projects. Also, Baidu’s AI bot Ernie failed to capture as much zest as it should have. Notably, reports suggest that BIDU is set to launch a new large-language model (LLM) based product in September, which could bode well for the company in the future.
What is the Price Target of Baidu Stock?
Ahead of Baidu’s Q2 print, Mizuho Securities analyst James Lee reiterated a Buy rating on BIDU stock with a price target of $170 (implying 35.8% upside potential). Lee is encouraged by three positive updates for Baidu going ahead. These include the overall broader economic recovery after China’s re-opening, the government’s favor toward the Chinese tech sector after the stringent crackdown, and favorable support from verticals such as AI, computing, and the Internet.
On TipRanks, Baidu stock commands a Strong Buy consensus rating. This is based on eight Buys one Hold rating received during the past three months. The average Baidu stock price target of $190 implies 53.25% upside potential from current levels.
Insights from Options Trading Activity
TipRanks now presents options activity to help investors plan their trades ahead of earnings releases. Options traders are pricing in BIDU stock to move by +/-6.20% after reporting earnings. Last quarter, the stock gained 3.97% following the better-than-expected Q1-2023 results.
The anticipated earnings move is determined by computing the at-the-money straddle of the options closest to the expiration after the earnings announcement.
Ending Thoughts
Baidu is facing the same pressures that its peers are facing. Once these short-term headwinds are behind us, Baidu is well-positioned to outshine the broader market, as analysts expect.
