Baidu Plunges After Q4 Results, Analyst Downgrade
Chinese search-engine company Baidu.com (NASDAQ: BIDU ) released its fiscal fourth-quarter earnings after the closing bell on Monday. During Tuesday's trading session, the stock has fallen sharply and was last trading down almost 11 percent to below $96.00.
The company reported non-GAAP earnings per share of $1.31 which came in ahead of Wall Street consensus EPS estimates of $1.29.
Revenue was $1.017 billion for the quarter, up 41.6 percent from last year. The revenue results were slightly ahead of Wall Street analysts' consensus revenue estimates of $101 billion.
"Baidu once again posted solid growth in 2012 amidst challenging macro conditions," CEO Robin Li said in a statement. "Similar to the early days of the Internet, this is a time of boundless innovation, creativity and opportunity in our industry. We are at the heart of the Internet in China and we're excited to embrace and lead the next stage of mobile- and cloud-centric Internet growth."
For the first-quarter, Baidu said that it sees revenue between $945.4 million to $975.9 million. This represents year over year growth of between 38.1 percent to 42.6 percent. This compares to current consensus of $967.1 million.
Analysts at Piper Jaffray and Barclays weighed in after the report. Barclays maintained an Equal Weight rating on the stock but lowered its price target to $108 from $113.
The analysts wrote that "while Baidu managed to meet 'headline' revenues and EPS expectation, the dilution impact from iQiyi and stepped-up investment/defensive initiatives has hurt margins more than expected. In addition, management reaffirms the 'difficult' mobile transition period is likely to take a couple years and admits that PC traffic growth has slowed, reinforcing its near-to mid-term challenges with both revenue growth and margin pressure."
Piper Jaffray analysts said that they think the Street needs to reset its earnings expectations for the company in upcoming quarters. They wrote that "while revenue expectations are likely fine, we believe the Street needs to rethink the level of Baidu's investment in promoting products, the contextual ad network, and mobile as well as the impact of the QiYi consolidation."
They added that they thought the next 2-3 quarters could be a transitional period for the company but that they see EPS growth in FY14 and would own the stock ahead of this acceleration.
Meanwhile, analysts at Stifel Nicolaus downgraded the company from Buy to Hold.
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