Q2 Preview: Baidu (BIDU) Sales Growth May Slow, But Mobile Initiative is Shareholder Friendly

Shares of Baidu (Nasdaq: BIDU) are lower on the session Monday heading into the Chinese Internet search giant's second-quarter 2012 earnings report, expected out after the market closes Monday.

Baidu's management will hold an earnings conference call at 8:00 PM on July 23, 2012 U.S. Eastern Time (8:00 AM on July 24, 2012 Beijing/Hong Kong Time). U.S. residents can dial-in at 1-718-354-1231 with passcode 98897814.

Analysts currently see Baidu profit growing a staggering 56 percent to $1.12 per share, from 72 cents reported in the same period last year. Revenue should grow well over 60 percent to $850.8 million. The Estimize consensus calls for EPS of $1.11 on revs of $812.8 million.

Shares of Baidu fell 21 percent in the quarter, to $114.98 at the end of June. The stock is down an additional 6.6 percent since then, but is down just 1.3 percent since the start of 2012.

Many expect Baidu to potentially miss the mark. Profit growth is expected to slow below 70 percent for the first time in at least nine quarters, according to Bloomberg -compiled data. In addition, the broader Chinese economy is seeing its own slowdown which is hitting companies. Net income for state-owned companies fell 12 percent in the first-half of 2012 as GDP slowed to a new three-year low in the second quarter.

Acting fast, the People's Bank of China cut key lending rates twice within about a one month time frame, each time by 25 basis points. The cut in June was the first time China trimmed lending rates since 2008, while the latest one only bolstered the urgency.

Analyst Views

Currently, Bloomberg data shows 27 analysts with a Buy rating on Baidu, four at Neutral, and zero with a Sell rating.

The consensus price target is $179, ranging from $118.50 up to $205. Over the last year, Baidu shares have traded within a range of $99.71 to $165.96.

Analyst Commentary

  • Deutsche Bank sees Buy-rated Baidu producing

  • Deutsche Bank sees EPS of RMB 7.18 (about $1.124) and revs of RMB 5.427 billion ($849.8 million). Heading into results, Deutsche Bank is positive following Baidu management clearing up its outlook expectations, saying second-quarter 2011 revenue growth was "outsized" due to increased digital ad sales on strength in the group buying and e-Commerce segments.

    Deutsche also cites data from Analysys saying China's Internet search market size grew 62 percent from the same period last year. Baidu currently boasts 75.5 percent market share.

    Baidu also recently launched its second smartphone based on its mobile operating system, Yi, in addition to the release of its own Android-based cloud ROM, which supports the Samsung Nexus S.

Stay tuned to's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Baidu's past performance at Streetinsider's Baidu's Income Statement .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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