Baidu (NASDAQ: BIDU) is gearing up to announce its 4Q21 results on February 24, reportedly. Primarily an Internet search engine provider, Baidu has expanded in other high-growth avenues over time. Currently, the company has created a significant position for itself in the artificial intelligence (AI) space, cloud services, autonomous driving, and smart transportation.
However, the company primarily derives its revenues from advertising and content marketing via its two major segments — Baidu Core (a search engine) and iQiyi (streaming and content marketing services). Clearly, the company relies on its online reach and user visits to its website to generate most of its revenues. Therefore, in anticipation of its Q4 results, we wanted to see how the company’s top line might have fared in the December quarter, based on the information from TipRanks’ new tool to track website visits.
The data we retrieved from the tool was not very encouraging. In the fourth quarter of 2021, Baidu retracted 21.06% in total estimated website visits, globally, from the preceding quarter (Q3). This indicates that the company might have experienced a sequential top-line headwind. If Baidu has also failed to perform well in its other revenue generating avenues, this statistic might be bad news.
Nonetheless, we decided to give the company some benefit of the doubt, trying to reason that this decline might be a regular seasonal trend. To check this, we played around with the tool a little and found the option to see the year-over-year comparison. However, this also did not give us any good news. We found that website visits have declined 44.25% from the fourth quarter of 2020. This means that Baidu’s year-over-year revenue compare also might have been hampered.
We still kept digging to find a silver lining. And we found one. Notably, a majority of global users visiting Baidu’s website are from the U.S. (25.7%). This is significant because this region is usually among those generating the highest average revenues per user.
This apart, Baidu’s strategic investments in AI and its growing efforts to strengthen this area is encouraging and might have been able to pull the company toward the 2%-12% year-over-year revenue growth that it projected in its last earnings call.
Experts Weigh In
Mizuho analyst James Lee recently reiterated a Buy rating on Baidu but trimmed the price target to $300 from $305. He is upbeat about the company meeting Q4 estimates. However, it is Q1 that Lee is more worried about, due to the macro headwinds and rising cases of the coronavirus in China that are playing spoilsport.
However, he expects Baidu’s cloud revenues to grow multiple times faster than its peers. Lee also names Baidu as his top pick in Chinese internet.
The rest of Wall Street is also optimistic, with a Strong Buy consensus rating, based on 9 Buys. The average BIDU price target is $259.
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