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Baidu's Innovative Moves Are Catalysts That Investors Shouldn't Miss

September 24, 2014 | About:

Chinese Internet search company Baidu (NASDAQ:BIDU) posted inspiring numbers on the board for the second quarter of 2014, driven by the outstanding performance of its mobile platform, including mobile search, mobile app and app distribution. Mobile monetization accounted for more than 30% of its total revenue for the quarter. In addition, the company is aggressively investing in advanced technologies such as Deep Learning that have already started enhancing user experience in the short term, and is forecasted to fetch a transformational change over a long-term period.

Moving progressively

The Beijing-based company for the second-quarter reported revenue of $1.93 billion, an increase of almost 57% as compared to $1.23 billion in the same quarter last year, beating the analysts’ estimates of $1.32 billion in revenue for the second-quarter. Its net income on the other side rose 34.1% to $571.7 million or earnings of $1.73 from $430 million or earnings of $1.26 per share in the corresponding period a year earlier, whereas the consensus were estimating earnings of $1.33 per share.

Looking forward, the internet search company for the third-quarter 2014 unveils revenue guidance in the range of $2.1 billion to $2.2 billion, which is approximately 50.9% to 55% higher than the revenue in the year ago period.

Opportunities to consider

According to GroupM, the internet continues to play a vital role in China with uprising shift to mobile internet as traffic to social networks, online video sites and search are picking up the momentum and contributing more than 50% mark in the region. The report also states that most of the brands will have various strategic pains in maintaining the momentum by increasing the advertisement spending into cross-screen mobile search and mobile campaigns during 2014.

Also, Andrew Carter, the president of Trading and Knowledge of GroupM China, has said that the mobile display is on the roll and continue to ramp up as brands will spend more on emerging app ad buys and in-app ad networks.

The Chinese internet giant is making impressive moves in the mobile and vigorous monetization of mobile search, mobile app and app distribution that should enable the company to improve its financial results in the second-half of the year. The company has recently upgraded its Mobile Baidu with advanced features and refreshed contents. Mobile Baidu is now better leveraged and looks more attractive with the inclusion of various light apps, web pages and native apps that facilitate rich, seamless and integrated Baidu experience to its user while exploring the new stuffs and help the users to connect with the new information and services through its multiple products.

Baidu also remains solid on the infrastructure and has the most advanced and powerful cloud infrastructure that should allow the company to supply supreme speed and reliability to its users across the world. Baidu is yet to fully exploit its full potential of its platform, technology and data capabilities, which are in the early stages of realization and which should drive its growth in the long run. Further, Baidu remains on track to invest aggressively in products and technologies that should certainly drive growth for its markets and help them to achieve their long-term goals.

The internet giant is also investing heavily in the big data center and technology. Baidu has recently inaugurated a new research and development center in Sunnyvale, California, and has declared the launch of three labs that will be concentrated on the artificial intelligence and big data capabilities. Besides, the company is investing in the analytical data-driven products and focused to introduce analytical data products for real estate prices in a short duration including the launch of box office theatrical releases.

Apart from these, the internet search company has launched Portuguese search in Brazil of late and has upgraded its online video operations. iQiyi is picking up the pace and is expected to grow at a healthy pace going forward that should contribute tremendously in the revenue for the second-half of the year. iQiyi leads in both the PC and Mobile as its monthly and daily unique visitors on both these platforms are reported on the top by iResearch that provide long-term prospects for online video. iQiyi looks strong on this platform to take a larger piece of share in this market.

Wrapping up

Baidu is currently trading at the trailing P/E multiple of 44.85 and forward P/E multiple of 4.41 that clearly states that the stock still holds cheap valuations and has a lot of room to grow in the future. Moreover, its PEG ratio for the next five years is forecast to remain at 1.03, which continues to support its growth and highlights resilient growth for the company going forward. In addition, the company is doing fairly well on the performance and wealth matrixes as its profit and operating profit yields for the trailing twelve months are 29.86% and 30.10%, respectively,

Its return on equity for the last twelve months is 29.15%. Baidu balance sheet displays total cash of $7.93 billion, which is quite sufficient to cover its total debt of 3.97 billion, which is well mixed by most measures. In fact, the analysts have estimated CAGR of 36.44% that is greater than the average industry CAGR of 20.02% for the next five years; indicate tremendous growth prospects for the company in the long-run.


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