Baidu Pops 8% After-Hours On Strong Earnings Beat

Chinese tech company Baidu (BIDU) has reported solid first quarter earning results, with Q1 Non-GAAP EPS of $1.25 beating consensus expectations by $0.69. Meanwhile revenue of $3.18B dropped 7% from a year ago, but easily beat the $3.1 billion consensus. GAAP EPS of $0.00 fell short by $0.23.

Shares spiked 8% in Monday’s after-hours trading following earnings, after already making a strong 7% gain during the day.

“With the pandemic coming under control in China, offline activities are rebounding and Baidu stands to benefit from a restart of the Chinese economy” said Robin Li, Co-founder and CEO of Baidu.

Li pointed out that in March, a month after the peak of COVID-19 new cases, Baidu’s traffic remained robust with Baidu App DAUs (daily active users) reaching 222 million, up 28% year over year, in-app search queries up 45% and feed time spent up 51%.

“Given COVID-19 headwinds, Baidu focused on quality revenue growth and continued to be disciplined with spending ROI, to maximize long-term shareholder value,” comments CFO Herman Yu.

Looking forward to the second quarter of 2020, Baidu expects revenues to be between $3.5 billion) and $3.9 billion, representing a growth rate of -5% to 4% year over year, which assumes that Baidu Core revenue will grow between -8% to 2% year over year.

But the company warned that the Covid-19 situation in China is evolving, and business visibility is very limited. This means the forecast is ‘subject to substantial uncertainty’ says Baidu.

From the Street, Baidu scores a cautiously optimistic Moderate Buy consensus, with an average analyst price target of $148 (38% upside potential). (See BIDU stock analysis on TipRanks)

“We believe the shares are undervalued, as we estimate core EBITDA growing 23% in FY21. Target assumes 7x ’21E core EBITDA vs. our 10x target multiple for Google core search” pointed out Oppenheimer analyst Jason Helfstein, as he reiterated his buy rating with a $155 price target (44% upside potential). Shares are currently trading down 15% on a year-to-date basis.

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