- Maggio 10, 2023
- Posted by: Oliver
- Categoria: Economics, Finance & accounting
Baidu has been described as ‘China’s Google,’ as it is the largest online search engine platform in the Chinese language internet. Founded in 2000, Baidu has long since diversified its businesses, and is now also one of China’s leading AI companies. Baidu currently operates through two segments; the smaller is iQiyi, while the larger, Baidu Core, accounts for more than 70% of Baidu’s total revenues.
Baidu Core provides a variety of online marketing services, as well as ‘non-marketing value added’ services. The company’s AI initiatives power a set of growing business segment, including the app platform Mobile Ecosystem; the AI Cloud; and Intelligent Driving.
Annual revenue last year was down slightly from 2021, slipping from $19.3 billion to 18.36 billion, or just under 5%. The firm’s 1Q23 financial release is scheduled for May 16, but we can look back at Q4 to see where it stands.
At the top line, quarterly revenue in 4Q22 came to $4.8 billion, flat y/y but $170 million ahead of expectations. At the bottom line, the company reported $2.21 in earnings per American depositary share, a figure that was up 31.5% from the prior year and which beat the forecast by 16 cents. Baidu demonstrated strong cash generation in the quarter, reporting free cash flow of $859 million, or $736 million with iQiyi’s contribution taken out. At the end of 2022, Baidu had a total of $26.87 billion in cash and liquid assets on hand.
We can check in again with Lincoln Kong for the Goldman view, who sees Baidu continuing to gain going forward. Kong writes of the stock, “Looking into 2023E, we believe Baidu is set for accelerating revenue/profit growth on a better macro backdrop benefiting Ads and cloud business (from 2Q onwards), and clearer visibility on monetization/traffic generation from ERNIE LLM, and hence expect 13% sales and core OP growth for 2023-24E. With the stock trading at 14X 2023E PE, and net cash accounting for more than 30% of market cap, we see continued favorable risk-reward.”
Quantifying his position here, Kong rates BIDU as a Buy, and his $186 price target indicates room for ~51% share appreciation over the next 12 months.
Tech firms get plenty of attention from Wall Street, and Baidu has 13 recent analyst reviews on file. All of them are positive, too, giving the stock its Strong Buy consensus rating. Shares in BIDU are trading for $123.43 and the $193 average price target implies ~56% upside from current levels.
