Wednesday, April 27, 2011

Baidu, Inc. (NASDAQ: BIDU): Q1 Earnings Preview 2011

Baidu, Inc. (NASDAQ: BIDU) is scheduled to release its first-quarter eanings after the closing bell on Wednesday, April 27, 2011. Analysts, on average, expect the company to report earnings of 45 cent per share on revenue of $367.38 million. In the year ago quarter, the company reported earnings of 20 cents per share on revenue of $189.60 million.

Baidu, Inc. provides Chinese and Japanese language Internet search services. The Company conducts its operations in China principally through Baidu Online Network Technology (Beijing) Co., Ltd., its wholly owned subsidiary in Beijing, China.

In the preceding fourth quarter, the Beijing, China-based company's net income was $175.9 million, or 50 cents a share, compared to $62.7 million, or $1.80 a share, a year ago, before a 10-for-1 stock split. On an adjusted basis, the company earned 52 cents per share in the fourth quarter. Revenue surged to $371.3 million compared with $184.7 million a year ago. Analysts, on average, expected the company to report earnings of 45 cent per share on revenue of $362.33 million.

At its last earnings call in January, Baidu said that revenue for the first quarter will come in between $360.6 million and $371.2 million, representing an 83.9 percent to 89.3 percent year-over-year increase. The company also said that it expects to aggressively increase investments for its server networks and offices as well as increase hiring in research and development.

The number of Internet users in China, already the world's largest online market, hit 457 million in 2010 -- up 19.1 percent from the previous year, according to  the figures released by the state-backed China Internet Network Information Center. More than 303 million people now use their mobile phone to surf the net, a jump of 29.6% on 2009. 

China still has vast untapped potential. According to China's Internet Information Centre, internet penetration in the country is still low, only 34% of total population.

Baidu, which has increased its focus on e-commerce and online video, grabbed more market share last year after rival Google Inc curtailed its operations following a high-profile fallout with Beijing over censorship. Baidu is the No. 1 Internet search engine in China with a 70 percent market share.The competitive landscape for Baidu has remained markedly positive despite the fact that Google has officially reentered the market. Their technologies seem to be outpacing their direct competitors and they have made some wise investments in social media.

Among other developments, the company recently announced that it will launch a licensed music search service in May, in a move to legitimize its current music search that critics say enables music piracy.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 40.52 and PEG ratio (5 yr expected) of 1.06. In terms of stock performance, Baidu shares have gained nearly 137 percent over the past year.

Full Disclosure: None.
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