What To Expect From Baidu This Year After A Successful First Quarter?

by Trefis Team
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Baidu (NASDAQ:BIDU) recently announced its Q1 earnings, reporting a 24% increase in net revenue to RMB 20.9 billion ($3.3 billion) for the March quarter. Strong revenue growth was complemented by a massive 103% increase in the company’s operating income (non-GAAP) to RMB 5.3 billion ($852 million), with non-GAAP operating margin expanding by 9 percentage points to 26%. Correspondingly, Baidu’s net income and earnings per ADS were up 90% to RMB 4.6 billion ($731 million) and RMB 13.03 ($2.08), respectively.

Baidu announced the IPO of its video streaming platform iQiyi last month, valuing the streaming service at around $13 billion. On a positive note for the company, it raised cash through the IPO and iQiyi had been operating at significant losses in the last couple of years. Going forward, this should help Baidu’s profitability in the near term. We have a revised $210 price estimate for Baidu, which is around 15% lower than the current market price. Baidu’s stock price has fluctuated between $180 and $260 in the last one year.

We forecast full year revenues to increase 15% to just under $15 billion. We have a conservative estimate for revenue growth for the company, which is slightly lower than consensus estimates. On the other hand, we expect margins to expand by over 5 percentage points through 2018  to 27.3% for the year leading to a 40% increase in its operating profit. We have summarized our full year forecasts for Baidu on our interactive dashboard. You can modify our forecasts for segment revenues and margins to gauge how it would impact the company’s earnings for 2018.

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