Chinese tech company Baidu (BIDU) has reported solid first quarter earning results, with Q1 Non-GAAP EPS of $1.25 beating consensus expectations by $0.69. Meanwhile revenue of $3.18B dropped 7% from a year ago, but easily beat the $3.1 billion consensus. GAAP EPS of $0.00 fell short by $0.23.
Shares spiked 8% in Monday’s after-hours trading following earnings, after already making a strong 7% gain during the day.
“With the pandemic coming under control in China, offline activities are rebounding and Baidu stands to benefit from a restart of the Chinese economy” said Robin Li, Co-founder and CEO of Baidu.
Li pointed out that in March, a month after the peak of COVID-19 new cases, Baidu’s traffic remained robust with Baidu App DAUs (daily active users) reaching 222 million, up 28% year over year, in-app search queries up 45% and feed time spent up 51%.
“Given COVID-19 headwinds, Baidu focused on quality revenue growth and continued to be disciplined with spending ROI, to maximize long-term shareholder value,” comments CFO Herman Yu.
Looking forward to the second quarter of 2020, Baidu expects revenues to be between $3.5 billion) and $3.9 billion, representing a growth rate of -5% to 4% year over year, which assumes that Baidu Core revenue will grow between -8% to 2% year over year.
But the company warned that the Covid-19 situation in China is evolving, and business visibility is very limited. This means the forecast is ‘subject to substantial uncertainty’ says Baidu.
“We believe the shares are undervalued, as we estimate core EBITDA growing 23% in FY21. Target assumes 7x ’21E core EBITDA vs. our 10x target multiple for Google core search” pointed out Oppenheimer analyst Jason Helfstein, as he reiterated his buy rating with a $155 price target (44% upside potential). Shares are currently trading down 15% on a year-to-date basis.
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