If Growth Is Back At Baidu, Shares Could Be Cheap

Baidu, the Chinese search giant (and a lot more), will report earnings for its June quarter after the close of regular market trading today followed by a conference call to discuss results at 8 pm EST.

Wall Street sellsiders expect the company to report earnings of $1.50 per share on revenues of $3.08 billion for the June quarter.

For the current quarter current Street consensus is for earnings of $1.70 per share on revenues of $3.40 billion.

For FY17, current Street estimates are at $5.79 per share on $12.65 billion in revenues.

Here are a few key areas that investors and Wall Street analysts will be watching:

  • Revenue growth- Q2 revenues should be up versus the same quarter a year ago and up from the growth rate of just under 7% seen in Q1:17.
  •  Expecting strong growth in Baidu's SVOD unit iQiyi (signed a deal with Netflix in April)
  • Feed ad metrics should be solid
  •  O2O flatlining but improving from the contraction seen in March quarter
  • Naomi revenues up in the low single-digits which could offset a decline in Baidu Deliveries which could have been soft despite aggressive discounting.
  •  Expect the recovery to continue in Q3 with growth of about 25% year-on-year especially given weak comps in the same quarter last year.

Typically after an event like the one that hit Baidu over a year ago (death of that young man), a turnaround takes a few quarters.

I think Baidu has turned the ship around and should now be back in growth mode.

We shall find out shortly.

I am positioned long going into Baidu's earnings event tonight after the close.

(Long bidu and nflx, long and short options in both)

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