Leading Chinese search provider Baidu (BIDU, Financial) released strong first-quarter results. The company came up with fantastic financials, exceeding its own outlook. Baidu’s core search business was performing well, driving the company's growth. Moreover, Baidu is confident of a better performance in the future, as the company is counting on the fast growing mobile segment. On the back of many key factors, Baidu can be a good long-term holding.
Strong financials
Baidu’s financials were strong. Its quarterly revenue reported an impressive 59% growth as compared to last year’s same quarter. Baidu also saw a good 8.8% growth in online marketing customers, which led the company to post a good 24% increase in net profit. On the earnings front, Baidu posted $1.23 per share, which outpaced consensus estimates of $1.04 per share.
Baidu is a famous name in China’s internet industry. It has aggressive strategies to grow faster and move ahead of peers -- Alibaba Group and Tencent. Both these competitors are making impressive moves to capture untapped opportunities in the growing e-commerce business. To hold its ground, Baidu is investing in its core business as it transitions to mobile devices such as smartphones from PC search advertising.
Baidu is expanding its operations on the international front as well. Looking at its performance in the past, the promises look concrete. Baidu is laser-focused on mobile, cloud-based services, and customer products. These segments are expected to generate strong income, and give enormous opportunity to Baidu to tap markets in future. Baidu is stretching its foot print to different sectors such as media, retail, and travel, along with financial and local services that should generate strong margins for the company.
Growth ahead
Further, Baidu has its eyes on the growing mobile segment. The changing customer preferences from feature phones to smartphones is a great opportunity for many companies, and Baidu is also lining up to benefit from it. Seeing this, Baidu is taking steps to expand its operations in segments such as media, social, online tools to deliver world class services. According to some sources, internet users logging in from mobile devices have increased over time, and Baidu is looking to maximize its profit and improve its market share as a result.
Recent studies have revealed that internet mobile search is increasing day by day. The statistics show that the number of active users have increased from 130 million to 160 million in two quarters. Seeing this, Baidu wants to capture these growing opportunities. It is making moves to strengthen its channel distribution through a number of initiatives, such as optimizing ad formats on the search page, making click-to-call, click-to-download buttons, as well as location extensions on the product side. Such moves by the company will help it generate healthy returns in the future.
Moving forward, Baidu has added the Plus V verification program on the safety front, which is an attractive feature which will attract more users. Also, with this feature, users will be able to advertise on the search page, which will be accretive to its revenue as the company expects solid growth in its customer base with this system in place.
Conclusion
Looking at the ratios, Baidu is quite undervalued with a forward P/E of just 3.61. Baidu is continually reporting solid results which indicate that the company is moving forward. Also, its core fundamentals are strong, indicating that Baidu looks set to get better in the future.
