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Home / Business / Baidu posts his first loss since his IPO – and things can get worse

Baidu posts his first loss since his IPO – and things can get worse



<p class = "canvas atomic text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Baidu s (NASDAQ: BIDU) share tumbler to a multiyear low after Chinese tech giant posted its first quarter earnings late on Thursday. " s (NASDAQ: BIDU ) share tumbler to a multiyear low after the Chinese tech giant had posted the first-quarter earnings late on Thursday.

On the plus side, revenue grew by 15% year on year to 24.1 billion RMB ($ 3.6 billion), which matched expectations. Baidu saw red ink for the first time since IPO in 2005, with a net loss of 327 million yuan ($ 49 million), against a surplus of 6.7 billion RMB a year earlier. Its adjusted earnings – which exclude divestments, acquisitions and other charges – doubled 80% to 967 million RMB ($ 144 million), or $ 0.41 per US Depository Share (ADS), missing estimates of $ 0.16.

For the second quarter, Baidu expects revenues to be roughly flat year over year on a reported basis, increasing only 1% -6% after excluding future sales. This growth is shockingly weak compared to its double-digit sales growth over the past two years. Baidu's stock deserved to push for that report, and things can get worse before they get better.

Image source: Getty Images.

A survey of key figures

Baidu's online market revenue rose 3% annually and accounted for 73% of the top line. This represented a massive slowdown in growth in previous quarters. Growth (YOY) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 23% 25%

18%

18%

Q1 2018

10%

3%

YOY = year over year. Data source: Baidu quarterly reports.

Baidu stated that strong demand for ads in the market for education, retail and business failed to compensate for "less vivid" demand from the health, online and financial sectors. Baidu also ended up revealing the growth of active Internet customers, and Hailong Xiang, senior VP in his search engine, abruptly interrupted.

At the same time, TAC (traffic acquisition costs) increased 41% annually and accounted for 13% of total revenue and 18% of market revenues. These percentages were in line with previous quarters, indicating that Baidu doesn't spend too much money to lock into advertisers.

<p class = "canvas-textile textile Mb (1.0em) Mb (0) – [MT] Google spent 22% of the ads revenue on the TAC last year, while Baidu's smaller competitor, and nbsp; Sogou spent a whopping 57% of turnover on the TAC last year. "Data-response time =" 43 "> By comparison, alphabet used Google 22% of ad's revenue on TAC last year, while Baidu's smaller competitor, Sogou spent a total of 57% of the turnover on the TAC last quarter.

However, Baidu's total operating expenses continued to grow 53% annually, and the non-GAAP operating margin declined from 26% to 2%. That spending spike was due to the ongoing investments in the virtual assistant DuerOS, the short video program Haokan, the autonomous Apollo driving platform, the Baidu App Gadgets, shooting services and other ecosystem expansion work.

Are these investments paid

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Baidu believes that these investments expand their moat against companies such as Alibaba (NYSE: BABA) Tencent (NASDAQOTH: TCEHY) and ByteDance . "> Baidu believes that these investments are expanding their moat against companies such as Alibaba (NYSE: BABA) Tencent (NASDAQOTH: TCEHY) and ByteDance .

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Alibaba competes against Baidu in the virtual assistant and smart market speakers and it also sells advertisements on their marketplaces and digital media . During the first quarter, Baidu & # 39; s installed base for DuerOS grew 279% annually to 275 million units as monthly voice requests increased 817% to 2 In comparison, Alibaba recently stated that 10 million of its Tmall Genie speakers had been activated since 2017. "data-response time =" 47 "> Alibaba is competing against Baidu in the virtual assistant and smart speaker market, and also sells ads across marketplaces and digital media platforms. During the first quarter, Baidus' installed base for DuerOS increased 279% annually to 275 million units, while monthly voting requests increased 817% to 2.37 billion. By comparison, Alibaba recently told that 10 million of Tmall Genie speakers had been activated since 2017.

Baidu's Xiaodu Speaker.

Baidus Xiaodu speaker. Image source: Baidu.

Tencent correlates users in WeChat, the most popular messaging application in China, with 1.1 billion monthly active users and Mini applications for a wide range of services. Daily active users on Baidu's app, competing against the massive platform, increased 28% annually to 174 million.

ByteDance entices Gen Z users away with Tik Tok, a popular short video app that topped 500 million monthly active users last year. Baidu's Haokan, the answer to Tik Tok, increased its active active users only 16% in order to 22 million in the quarter.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "But that's not all – Tencent and Alibaba are also competing against Baidu in the markets for advertising, streaming video, cloud and autonomous drive . In other words, if Baidu stops expanding its ecosystem, it can leave the ever-changing technology curve. "data-response time =" 75 "> But that's not all – Tencent and Alibaba also compete against Baidu in the markets for advertising, streaming video, cloud and autonomous driving . In other words, if Baidu ceases to expand its ecosystem, it could be left with the ever-changing technology curve.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt Alibaba and Tencent reported robust earnings earlier this week. Alibaba's e-commerce revenue increased by 51% from one year Tencent, despite a slow-recovering gaming business, still showed a 17% increase in net profit . "data-response time =" 76 "> Both Alibaba and Tencent reported robust earnings earlier this week. Alibaba's e-commerce revenue increased by 51% from a year ago. Tencent, despite a slow rebuilding of the gaming industry, continued to show a 17% increase in net profit.

The struggle to adapt to a changing market

Baidu's quarterly report was disappointing, and the poor guidance tells investors to expect anemic revenue growth and higher spending over the next quarters. The vulnerable resignation to its head of department also indicates that the company is struggling to adapt to a changing market.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt Emid Currently, Baidu does not panic and sell its shares at these levels, but those looking for a better Chinese technology games should consider buying Tencent or Alibaba instead. "data-reactid =" 79 "> Baidu approved a new $ 1 billion buy-back plan to smooth things over, but it would no doubt be better to spend the money to strengthen their defense against Tencent, Alibaba and ByteDance. Investors currently holding Baidu should not panic and sell their stocks at these levels, but those looking for a better Chinese tech game should consider buying Tencent or Alibaba instead.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-response time =" 80 "> More from Motley Fool

<p class =" canvas-atom texttext Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm "type =" text "content =" Suzanne Frey, a leader in Alphabet, is a member of The Motley Fool's board. Leo Sun owns shares in Baidu and Tencent Holdings. Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Baidu and Tencent Holdings. Motley Fool has a disclosure rules . "data-response time =" 88 "> Suzanne Frey, a leader in the alphabet , is a member of The Motley Fools Board. Leo Sun owns shares in Baidu and Tencent Holdings. Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Baidu and Tencent Holdings. Motley Fool has a disclosure policy.


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