Baidu Inc (ADR) (NASDAQ:BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the fourth quarter and fiscal year endedDecember 31, 2015[1].

“2015 was a touchstone year for Baidu: we made significant progress in broadening our online marketing platform and further extending our reach into transactions services,” said Robin Li, chairman and CEO of Baidu. “Even as China’s overall growth slows, services and domestic consumption are growing. Services and domestic consumption-related verticals are supported by the government’s Internet+ initiative and hold tremendous potential. Our top revenue verticals—retail/ecommerce, local services, financial services, healthcare, and education—reflect Baidu’s vital role in connecting users with merchants in these growing sectors. Looking ahead, we will continue to build the Next Baidu not only to benefit from, but also drive, key secular trends of rising domestic consumption, growth in services, and a rapidly evolving mobile environment,” Li said.

“We are very pleased to deliver a strong set of results in the fourth quarter. In 2015, we further executed on our vision to connect people with services and drove strong momentum in this area,” said Jennifer Li, CFO of Baidu. “We look forward to continuing this journey in 2016 to further build out Baidu’s online marketing and transactions services platform. As a reminder, as a result of Baidu’s exchange of Qunar shares with Ctrip, Baidu deconsolidated Qunar’s financials after October 26, 2015,” she said.

Fourth Quarter and Fiscal Year 2015 Operational Highlights

  • Mobile search monthly active users (MAUs) were 657 million for the month of December 2015, an increase of 21% year-over-year
  • Mobile maps MAUs were 302 million for the month of December 2015, an increase of 43% year-over-year
  • Gross merchandise value[1] (GMV) totaled RMB14.7 billion ($2.3 billion) for the fourth quarter of 2015, an increase of 397% year-over-year
  • Baidu Wallet activated accounts reached 53 million at the end of December 2015, an increase of 189% year-over-year

Fourth Quarter and Fiscal Year 2015 Financial Highlights

  • Total revenues in the fourth quarter of 2015 were RMB18.699 billion ($2.887 billion), a 33.1% increase from the corresponding period in 2014. Mobile revenue represented 56% of total revenues for the fourth quarter of 2015, compared to 42% for the corresponding period in 2014.
  • Total revenues in fiscal year 2015 were RMB66.382 billion ($10.248 billion), a 35.3% increase from 2014. Mobile revenue represented 53% of total revenues in 2015, compared to 37% in 2014.
  • Operating profit in the fourth quarter of 2015 was RMB3.535 billion ($545.7 million), a 19.7% increase from the corresponding period in 2014. Transaction Services[2] reduced non-GAAP operating margins by 24.9 percentage points andiQiyi further reduced non-GAAP operating margins by 5.9 percentage points for the fourth quarter of 2015.
  • Operating profit in fiscal year 2015 was RMB11.672 billion ($1.802 billion), an 8.8% decrease from 2014. Transaction Services reduced non-GAAP operating margins by 25.1 percentage points and iQiyi further reduced non-GAAP operating margins by 5.5 percentage points for the fiscal year 2015.
  • Net income attributable to Baidu in the fourth quarter of 2015 was RMB24.712 billion ($3.815 billion), a 663.0% increase from the corresponding period in 2014. Diluted earnings attributable to Baidu per ADS for the fourth quarter of 2015 were RMB70.92 ($10.95); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2015 were RMB71.90 ($11.10); diluted earnings attributable to Baiduper ADS excluding net gain recognized in Baidu’s exchange of Qunar shares with Ctrip for the fourth quarter of 2015 were RMB7.61 ($1.18).
  • Net income attributable to Baidu in fiscal year 2015 was RMB33.664 billion ($5.197 billion), a 155.1% increase from 2014. Diluted earnings attributable to Baidu per ADS for the fiscal year 2015 were RMB95.15 ($14.69); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) in fiscal year 2015 were RMB99.11 ($15.30); diluted earnings attributable to Baidu per ADS excluding net gain recognized inBaidu’s exchange of Qunar shares with Ctrip in fiscal year 2015 were RMB32.49 ($5.02).

Fourth Quarter 2015 Results

Baidu reported total revenues of RMB18.699 billion ($2.887 billion) for the fourth quarter of 2015, representing a 33.1% increase from the corresponding period in 2014.

Online marketing revenues for the fourth quarter of 2015 were RMB17.610 billion ($2.719 billion), representing a 27.2% increase from the corresponding period in 2014. Baidu had about 555,000 active online marketing customers[3] in the fourth quarter of 2015, representing a 6.1% increase from the corresponding period in 2014 and a 10.9% decrease from the third quarter of 2015. Revenue per online marketing customer for the fourth quarter of 2015 was approximatelyRMB31,000 ($4,786), a 17.4% increase from the corresponding period in 2014 and a 9.5% increase compared to the third quarter of 2015.

Traffic acquisition cost as a component of cost of revenues was RMB2.616 billion ($403.9 million), representing 14.0% of total revenues, as compared to 13.4% in the corresponding period in 2014 and 13.1% in the third quarter of 2015.

Bandwidth costs as a component of cost of revenues were RMB1.001 billion ($154.5 million), representing 5.4% of total revenues, compared to 5.3% in the corresponding period in 2014.   

Depreciation costs as a component of cost of revenues were RMB692.0 million ($106.8 million), representing 3.7% of total revenues, compared to 4.0% in the corresponding period in 2014.

Operational costs as a component of cost of revenues were RMB1.182 billion ($182.4 million), representing 6.3% of total revenues, compared to 4.4% in the corresponding period in 2014. This increase was mainly due to Transaction Services and iQiyi-related operating costs.

Content costs as a component of cost of revenues were RMB1.382 billion ($213.3 million), representing 7.4% of total revenues, compared to 4.2% in the corresponding period in 2014, and 5.0% in the third quarter of 2015. The year-over-year increase was mainly due to iQiyi’s increased content costs.

Selling, general and administrative expenses were RMB4.528 billion ($699.0 million), representing an increase of 28.5% from the corresponding period in 2014, primarily due to an increase in promotional spending for transaction services.

Research and development expenses were RMB2.487 billion ($383.9 million), a 16.4% increase from the corresponding period in 2014. The increase was primarily due to the growth of research and development personnel-related cost.

Share-based compensation expenses, which were allocated to related operating costs and expense line items, were RMB341.0 million ($52.6 million) in the fourth quarter of 2015, compared to RMB339.0 million in the corresponding period in 2014.

Operating profit was RMB3.535 billion ($545.7 million), representing a 19.7% increase from the corresponding period in 2014. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB3.876 billion ($598.3 million), a 17.8% increase from the corresponding period in 2014.

Other income, net was RMB24.294 billion (US$3.750 billion) in the fourth quarter of 2015. The increase from RMB96.1 million of the corresponding period in 2014 was primarily attributable to the investment gain recognized as a result of Baidu’sexchange of Qunar shares with Ctrip.

Income tax expense was RMB3.580 billion ($552.6 million), compared to income tax expense of RMB538.5 million in the corresponding period in 2014. The effective tax rate for the fourth quarter of 2015 was 12.7% as compared to 15.6% for the corresponding period in 2014. There is a 10% tax accrual on the gain associated with Baidu’s exchange of Qunar shares with Ctrip.

Net income attributable to Baidu was RMB24.712 billion ($3.815 billion), representing a 663.0% increase from the corresponding period in 2014. Basic and diluted earnings per ADS for the fourth quarter of 2015 amounted to RMB71.10($10.98) and RMB70.92 ($10.95), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB25.053 billion ($3.867 billion), a 600.2% increase from the corresponding period in 2014. Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2015 amounted to RMB72.09 ($11.13) and RMB71.90 ($11.10), respectively.

As of December 31, 2015, the Company had cash, cash equivalents and short-term investments of RMB67.929 billion ($10.486 billion). Net operating cash inflow for the fourth quarter of 2015 was RMB6.070 billion ($937.1 million). Capital expenditures for the fourth quarter of 2015 were RMB1.424 billion ($219.8 million).

Adjusted EBITDA (non-GAAP), defined in this announcement as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, was RMB4.815 billion ($743.3 million) for the fourth quarter of 2015, representing a 16.7% increase from the corresponding period in 2014.

Fiscal Year 2015 Results

Total revenues in 2015 were RMB66.382 billion ($10.248 billion), representing a 35.3% increase from 2014.

Online marketing revenues in 2015 were RMB64.037 billion ($9.886 billion), representing a 32.0% increase from 2014. Baidu had about 1,049,000 active online marketing customers in 2015, representing a 29.0% increase from 2014.Revenue per online marketing customer for 2015 was RMB60,500 ($9,340), an increase of 1.9% from 2014.

Traffic acquisition costs in 2015 were RMB8.861 billion ($1.368 billion), representing 13.3% of total revenues, compared to 12.9% in 2014.

Bandwidth costs as a component of cost of revenues were RMB3.717 billion ($573.8 million), representing 5.6% of total revenues, compared to 5.8% in 2014.

Depreciation costs as a component of cost of revenues were RMB2.560 billion ($395.1 million), representing 3.9% of total revenues, compared to 4.1% in 2014.

Operational costs as a component of cost of revenues were RMB3.882 billion ($599.2 million), representing 5.8% of total revenues, compared to 4.6% in 2014.

Content costs as a component of cost of revenues were RMB3.745 billion ($578.1 million), representing 5.6% of total revenues, compared to 3.7% in 2014. The year-over-year increase was mainly due to iQiyi’s increased content costs.

Selling, general and administrative expenses in 2015 were RMB17.076 billion ($2.636 billion), representing an increase of 64.5% from the previous year, primarily due to an increase in promotional spending for transaction services.

Research and development expenses totaled RMB10.176 billion ($1.571 billion) in 2015, representing a 45.8% increase from 2014. The increase was primarily due to an increase in the number of research and development personnel.

Share-based compensation expenses, which were allocated to related operating cost and expense line items, were RMB1.387 billion ($214.1 million) in 2015, compared to RMB962.7 million in 2014.

Operating profit in 2015 was RMB11.672 billion ($1.802 billion), an 8.8% decrease from 2014. Operating profit excluding share-based compensation expenses (non-GAAP) in 2015 was RMB13.059 billion ($2.016 billion), representing a 5.1% decrease from 2014.

Other income, net was RMB24.728 billion (US$3.817 billion) in 2015, compared to RMB260.6 million in 2014. The increase was primarily attributable to the investment gain recognized as a result of Baidu’s exchange of Qunar shares with Ctrip.

Income tax expense was RMB5.474 billion ($845.1 million), compared to an income tax expense of RMB2.231 billion in 2014. The effective tax rate for 2015 was 14.4% as compared to 15.4% in 2014.

Net income attributable to Baidu in 2015 was RMB33.664 billion ($5.197 billion), representing a 155.1% increase from 2014. Basic and diluted earnings attributable to Baidu per ADS for 2015 amounted to RMB95.46 ($14.74) and RMB95.15($14.69), respectively.

Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) in 2015 was RMB35.051 billion ($5.411 billion), reflecting a 147.5% increase from 2014. Basic and diluted earnings attributed to Baidu per ADS excluding share-based compensation expenses (non-GAAP) in 2015 were RMB99.43 ($15.35) and RMB99.11 ($15.30), respectively.

Net operating cash inflow in 2015 was RMB19.422 billion ($2.998 billion). Capital expenditures in 2015 were RMB5.230 billion ($807.3 million).

Adjusted EBITDA (non-GAAP) was RMB16.660 billion ($2.572 billion) in 2015, representing a 0.6% decrease from 2014.

Outlook for First Quarter 2016

Baidu currently expects to generate total revenues in an amount ranging from RMB15.410 billion ($2.379 billion) to RMB15.970 billion ($2.465 billion) for the first quarter of 2016, representing a 21.1% to 25.5% year-over-year increase. On an apples-to-apples basis, excluding Qunar from Baidu’s financials, the guidance represents a 27.8% to 32.5% year-over-year increase. Following Baidu’s exchange of Qunar shares with Ctrip, Baidu deconsolidated Qunar’s financials after October 26, 2015. This forecast reflects Baidu’s current and preliminary view, which is subject to change. (Original Source)

Shares of Baidu opened today at $158.22. BIDU has a 1-year high of $223.95 and a 1-year low of $100. The stock’s 50-day moving average is $161.49 and its 200-day moving average is $168.96.

On the ratings front, Baidu (NASDAQ: BIDU) has been the subject of a number of recent research reports. In a report released yesterday, Deutsche Bank analyst Alan Hellawell upgraded BIDU to Buy, with a price target of $220, which represents a potential upside of 39.0% from where the stock is currently trading. Separately, on February 22, Credit Suisse’s Dick Wei maintained a Buy rating on the stock and has a price target of $235.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Alan Hellawell and Dick Wei have a total average return of 21.8% and 17.5% respectively. Hellawell has a success rate of 40.0% and is ranked #195 out of 3666 analysts, while Wei has a success rate of 33.3% and is ranked #356.

The street is mostly Bullish on BIDU stock. Out of 7 analysts who cover the stock, 5 suggest a Buy rating and 2 recommend to Hold the stock. The 12-month average price target assigned to the stock is $227.50, which represents a potential upside of 43.8% from where the stock is currently trading.

Baidu Inc is a Chinese language Internet search provider. The Company offers a Chinese-language search platform on its website Baidu.com.