Baidu Takes Buyback Program To $3B; Stock Down 6% Post-Print

Chinese tech giant Baidu (BIDU) has announced that it has now taken its 2020 Share Repurchase Program from $1 billion to $3 billion, effective through December 31, 2022.

During the second quarter Baidu returned $540 million to shareholders, bringing its cumulative repurchase for the last two years to approximately $1.9 billion.

The announcement came as part of the company’s second quarter earning results, which saw the stock crater 6% in Friday’s trading. News of an SEC investigation into Baidu-owned online streaming provider iQIYI (IQ) also weighed on shares.

Baidu reported overall revenues RMB 26.03B, down 1% year-over-year but up 15% from the previous quarter. For the third quarter of 2020, Baidu expects revenues to be between RMB 26.3 billion and RMB 28.7 billion, representing a growth rate of -6% to 2% year over year, which assumes that Baidu Core revenue will grow between -7% and 3% year over year.

“The COVID-19 situation in China is evolving, and business visibility is very limited” the company stated.

However, Q2 Non-GAAP EPS of $2.08 beat Street expectations by $0.66 while GAAP EPS of $1.46 also beat by $0.57.

“The healthy growth of Baidu App and new AI businesses have enabled Baidu Core’s adjusted EBITDA margin to reach 41% in the second quarter. We plan to continue heavy investments in technology to maximize Baidu’s future growth potential” commented Herman Yu, CFO of Baidu.

Shares in BIDU are down 8% year-to-date, but analysts have a bullish Strong Buy consensus on the stock’s outlook. That’s alongside an average analyst price target of $151 (29% upside potential).

“As the No. 1 search engine in China, BIDU benefits from limited search competition” comments Oppenheimer analyst Jason Helfstein. He has a buy rating on BIDU with a $155 price target, but notes that large ecommerce, mobile communication, and content platforms have been aggressively competing for consumer attention, weighing on BIDU growth and margins.

“However, we are now seeing competitive pressure subsiding and management has reduced investments to stabilize margins, making the stock a better value play” the analyst concludes. (See BIDU stock analysis on TipRanks).

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