Baidu Earnings Preview: Can the Chinese AI Stock Rebound on Earnings?
Baidu Earnings Preview: Can the Chinese AI Stock Rebound on Earnings?
Getting back to a levels traded in early October would require a nearly 40% rally
- Baidu is set to report earnings Thursday.
- Analysts expect $2.49 earnings per share on $4.78 billion in revenue.
- The company may encounter faces headwinds because the Trump administration is expected to restart the trade war.
Baidu (BIDU) is scheduled to report third-quarter earnings on Thursday, before the markets open.
The Chinese internet and artificial intelligence stock was on track for a second straight month of losses as today. The stock has suffered since the U.S. election, with fears that President-elect Trump will take a harsher stance against China on trade and overall policy.
Baidu’s losses have accelerated amid broader struggles in the Chinese economy. Now, an incoming U.S. administration that’s expected to take a tougher stance on China is adding to the uncertainty over the company’s stock price.
Baidu announced several new AI products during the Baidu World 2024 conference last week in Shanghai. The company will offer traditional AI tools like image and text generators, along with specific AI images and AI-enabled smart glasses. Baidu has also launched developer-focused apps that could write code via simple explanations.
The pace of spending by companies without immediate returns on those expenses has quelled some of the AI optimism seen over the first half of the year. That said, if Baidu Inc. reports good numbers and positive guidance, it has the potential to attract investment for those looking to enter the AI race through a Chinese name.
What do analysts expect from Baidu?
Analysts anticipate Baidu will report earnings per share (EPS) of $2.49 on $4.78 billion in revenue, according to TradingView. That would be down from $2.79 per share on $4.72 billion in revenue just a year ago. Last quarter, Baidu posted EPS of $2.89 on $4.67 billion in revenue.
Baidu has beaten earnings expectations in five of the last five reporting periods, but it missed revenue in two of the last five periods. The consensus price target stood at 85.24 per share, representing a significant decline from Monday’s 121.84, as investors prepare for the likely restart of a trade war between the U.S. and China.
Meanwhile, the macro backdrop is presenting challenges for Baidu. China’s economy remains depressed, although recent economic indicators have offered hope for a modest recovery. Markets are hopeful the People’s Bank of China (PBOC) and other authorities will increase monetary and fiscal stimulus, but there isn’t a clear roadmap yet.
Trading Baidu earnings
Baidu currently trades with an implied volatility rank (IVR) of 46.0, meaning volatility is slightly lower compared to the previous 12 months of trading. The options market expects a move of +/- 4.67 points, or about 5% of the stock price. That is in the lower range of the 5%-10% average expected move for post-earnings moves among S&P 500 companies.
On a technical basis, BIDU’s price is trading near the August and September swing lows, which could offer a level of potential support should the stock price fall after earnings. However, there’s a tough path forward to get back to levels traded in early October, which would require a nearly 40% rally from the current prices.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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