China's giant search engine Baidu stock (NASDAQ:BIDU) is scheduled to announce its first quarter 2024 earnings on May 16th. Baidu's revenue for the quarter is expected to be $4.34 billion, down about 1% from a year ago. The company expects earnings to be approximately $2.22 per share. So what are some of the trends likely to drive Baidu's revenue this quarter?
In the fourth quarter of 2023, Baidu reported sales of 34.95 billion yuan (approximately $4.9 billion), an increase of 6% year-on-year, and adjusted net profit of 7.76 billion yuan, an increase of approximately 44% year-on-year. did. Growth was primarily driven by the company's online marketing business, which sells advertising. Demand for search advertising and online marketing has increased in China as more companies look to target customers as the country reopens. However, we believe the online marketing business may slow slightly into the first quarter as consumer spending growth slows.
Baidu is considered an AI leader of sorts in China, with a search engine called Apollo Go and a self-driving taxi division. Last quarter, non-marketing-related revenue increased 9% year over year to 8.3 billion yuan ($1.17 billion), mainly driven by the AI cloud business. According to the Nikkei Shimbun, Tesla is collaborating with Baidu to roll out self-driving features in China, and is reportedly using Baidu's mapping and navigation tools. Apple is also reportedly working with Baidu to use generative artificial intelligence technology in its devices in China. However, Baidu's AI business may be partially affected by U.S. restrictions on supplies of advanced semiconductors to China. Baidu has its own Kunlun AI chip, which may help soften the impact, but chips made by Nvidia and others remain the most sophisticated AI chips.
BIDU stock has suffered a 50% plunge from its $215 level in early January 2021 to around $110 today, while the S&P 500 index has risen about 40% over the past three years. Notably, BIDU stock has underperformed the broader market in each of the past three years. The stock returned -31% in 2021, -23% in 2022, and 4% in 2023. In comparison, the S&P 500 returned 27% in 2021, -19% in 2022, and 24% in 2023.it shows that BIDU underperformed the S&P In 2021, 2022 and 2023.
in fact, Consistently outperforms the S&P 500 – Good times and bad – The past few years have been difficult for individual stocks. Information technology sector stalwarts such as MSFT, AAPL, NVDA, as well as mega-cap stocks such as his GOOG, TSLA and AMZN.
In contrast, the Trefis High Quality (HQ) portfolio, which includes a collection of 30 stocks, Outperformed the S&P 500 every year over the same period. why is that? As a group, Headquarters portfolio stocks carried less risk and delivered better returns compared to the benchmark index. It's not been a roller coaster ride, as evidenced by the performance metrics of our corporate portfolio.
Given the current uncertain macroeconomic environment of high oil prices and rising interest rates, BIDU may face a similar situation in 2021, 2022, and 2023. Underperform the S&P Will it recover in the next 12 months?
So, is Baidu stock attractive at its current level of around $112 per share? We believe so. Baidu trades at just about 10 times consensus 2023 earnings. This is well below the approximately 40x multiple the company traded at in February 2021. Furthermore, Baidu has a large cash position of over $18 billion as of the end of Q4 2023, accounting for over 40% of the company's current market capitalization. This means the company's 2024 P/E multiple (excluding cash) will be just 6x, making the stock even more valuable. We value Baidu shares at approximately $119 per share, slightly above market price. We plan to reconsider the company's price forecast after the first quarter results are announced. Check out our analysis. Baidu revenue and Baidu rating Learn more about how the company's earnings are trending and how its valuation compares to its competitors.
| Return value | May 2024 MTD [1] |
2024 YTD [1] |
2017-24 total [2] |
| BIDU return | 8% | -6% | -32% |
| S&P500 return | Four% | 9% | 133% |
| Trefis’ Enhanced Value Portfolio | Four% | Four% | 636% |
[1] Returns as of May 14, 2024
[2] Cumulative returns since the end of 2016
invest with Trefis Portfolio that beats the market
see all Trefis price estimation
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
