Baidu, Inc. (NASDAQ:BIDU) has expanded its business model in recent years. As the company continues to dominate the Chinese search engine market with a 79.52% market share with its Baidu app, accelerated growth is expected to come from its AI Cloud solution, which saw a 45% increase in sales. during the last trimester. Users can tap into Baidu‘s AI Cloud to apply machine and deep learning to complex tasks that are typically performed by teams of individuals, driving up cost and application efficiency. Baidu has made progress in securing market share in China with its AI Cloud, with a 26% stake and recent data shows it is ahead of rivals Alibaba (NYSE:BABA)Huawei and Tencent (HKG:TCEHY) in this engine of growth for the company.
Baidu beats estimates for the first quarter of 2022
In addition to expanding its AI Cloud service, the company also convincingly beat analysts’ earnings forecasts for the first quarter of this year. Baidu finished on a non-GAAP EPADS of $1.77, beating it by a whopping $0.94. Revenue rose 1% year-on-year to $4.48 billion, beating estimates of $320 million. The company also reported negative free cash flow of $17 million, with the majority of its losses related to its iQIYI content streaming service; when this operating segment is excluded, the company’s free cash flow ended at $175 million.
By taking a closer look at Baidu’s operating segments, one can see the strengths and general direction the company is heading towards. Baidu’s non-online marketing revenue rose 35% year-on-year to $903 million as it shifts to offering cloud and AI-based services. Still, Baidu Core, which includes its search app, continues to be the company’s biggest revenue contributor with $3.37 billion, up 4% year-on-year. iQIYI contributed $1.15 billion in revenue, and its revenue is down 9% year-over-year. Analysts have suggested that iQIYI is suffering from a number of headwinds: including a shrinking subscriber base, content shortages and increased competition from rival platforms Bilibili, Douyin and Kuaishou.
Baidu’s estimated performance for the second quarter of 2022
Baidu is currently up 1.88% year-to-date and 14% after reporting its results for the first quarter of this year. The company is trading 39% below the market beat consensus price target that can be taken as an indication that the company is undervalued or underperforming analysts’ expectations. Either way, Baidu executives said the company will face a tough next quarter as COVID-19 continues to grip its domestic market. China is continuing its zero covid policy with lockdowns in its major economic hubs such as Shanghai, which is expected to dampen revenue from its most important operating segments. Due to the unpredictability of the outbreak, leaders declined to give guidance for the rest of this year.
Baidu Technical Analysis
Baidu is one of the few stocks in the internet industry that has managed to consolidate its price in recent quarters, as its peers continue a clear downward trend. Changing risks and investor investment appetites and a host of macroeconomic headwinds have hit stocks hard. However, there was a brief respite for the tech-heavy NASDAQ as it jumped 1% in the past few days, giving bulls a much needed break.
In the medium term, Baidu’s price is heading higher, with the price momentum and trend confirming this. In the immediate term, Baidu is rebounding towards the mean after briefly trading two standard deviations above it. Volume also confirms the move back towards the $124 level, with more conviction on the red candles than the green ones. The stock is expected to continue its horizontal move with low volatility as the Bollinger Bands contract again.
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