Baidu Inc (ADR) (NASDAQ:BIDU) announced revised revenue guidance for the second quarter of 2016 and provided an update on recent business developments. Baidu currently expects estimated second quarter 2016 revenue to be in the range of RMB18.100 billion ($2.807 billion) to RMB18.200 billion ($2.823 billion), compared to the previously stated range of RMB20.110 billion ($3.119 billion) to RMB20.580 billion ($3.192 billion).
Since the beginning of May 2016, Baidu has taken steps to implement measures requested by regulatory authorities, such as modifying paid search practices. Baidu has also proactively implemented numerous additional measures to deliver a better user experience and build a safer and more trustworthy platform for users, including turning down customers who do not meet Baidu’snew requirements, creating an industry-leading customer credibility ranking system and weighing customer credibility more highly in the ranking algorithm, reducing the number of sponsored links, and making upgrades to Baidu’s user feedback system and user protection programs, to name but a few. These measures enhance user experience and the Company observed solid user traffic.
The revenue guidance revision was mainly attributable to the following factors:
First, regulatory authorities continue to review the online marketing practices of medical, pharmaceutical, healthcare and other similar businesses, and have also implemented stricter advertising regulations for medical organizations. The review is being rolled out with varied timing with different levels of implementation and interpretation across geographies. While the review is underway, the Company has observed a reduction or delay in spend from a significant portion of medical customers. These customers may be in the process of receiving instruction from regulatory authorities, gathering and submitting required documentation and adjusting their practices to comply with new regulations.
The implementation of and compliance with new regulations could take place over a prolonged period of time. The Company notes that high quality medical customers who have reduced or delayed spend would likely be compliant with new regulations over time. As such, the Company expects spend from these customers to recover gradually.
Second, the Company has reduced the number of sponsored links across the platform. This measure impacts revenue over the short term but enhances user experience and will drive benefit to Baidu over the long term.
“Baidu provides a strong, unique value proposition to its users and customers by helping users find whatever it is they are looking for, and connecting online marketers with those users. This role comes with great social responsibility and user experience is our top priority,” said Robin Li, Baidu’s chairman and chief executive officer. “Although a significant portion of our revenue is sacrificed, the steps we have taken to further bolster a healthy, safe and trustworthy online and offline ecosystem will result in long term benefit and reward for Baidu.”
Baidu believes higher standards related to customer requirements, sponsored links, user feedback and user protection mechanisms, will help improve the user experience, strengthen Baidu’s market position and benefit the Company over the long term. (Original Source)
Shares of Baidu opened today at $163.55. BIDU has a 1-year high of $217.97 and a 1-year low of $100. The stock’s 50-day moving average is $174.35 and its 200-day moving average is $178.92.
On the ratings front, Baidu has been the subject of a number of recent research reports. In a report released today, Barclays analyst Alicia Yap downgraded BIDU to Hold, with a price target of $180, which represents a potential upside of 10.1% from where the stock is currently trading. Separately, on June 8, Brean Murray Carret’s Fawne Jiang reiterated a Buy rating on the stock .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Alicia Yap and Fawne Jiang have a total average return of 19.0% and 1.8% respectively. Yap has a success rate of 53.8% and is ranked #405 out of 3892 analysts, while Jiang has a success rate of 38.5% and is ranked #1317.
The street is mostly Bullish on BIDU stock. Out of 9 analysts who cover the stock, 8 suggest a Buy rating and one recommends to Hold the stock. The 12-month average price target assigned to the stock is $216.00, which represents a potential upside of 32.1% from where the stock is currently trading.
Baidu, Inc. engages in the provision of internet search solutions and online marketing solutions. The company also operates an e-commerce platform with an online payment tool, develops and markets web application software, and provides human resource related services. Its products include search products and web directory, search-based community products, mobile search, related products and services for websites and enterprises, e-commerce, entertainment products, software and related search products. The company was founded by Yanhong Li and Xu Yong on January 18, 2000 and is headquartered in Beijing, China.