Earnings

Baidu, iQiyi, Weibo: which share price is the best bet after Q2 earnings?

Having grappled with China’s slowing economic growth and the fallout of the US-China trade war in the past few months, the trio of tech stocks had the odds stacked against them as they prepared to report their quarterly numbers this week.

Each share price showed signs that recent events have hampered their momentum prior to reporting. Baidu [BIDU] and Weibo [WB] struggled in particular, with a falling share price throughout the year – the former seeing a 36% drop from the start of the year, and the latter seeing a 28% drop. 

In the same period, iQiyi [IQ] was up by 17%, although this was still lower than the computer and technology sector, which gained by 29%, as well as the S&P 500, which gained by 15%. 

Once the statements came in, however, there were signs that some of the stocks may be ready to bounce back.

36%

Baidu's share price decline since the start of 2019

 

Baidu lifts off after beating estimates

The Chinese search engine company, often referred to as the Google of China, saw shares rise over 8% in extended trading after it beat analyst estimates. 

Baidu posted a revenue of $3.73bn for its second quarter, beating estimates of $3.65bn. The growth was largely down to its video streaming service iQiyi, which saw revenue rise 15% to $1.01bn.

The search company also posted a second quarter net income of $351m, or $0.96 per share, compared to a loss in the same period last year. FactSet earnings estimations came in at $0.88 per share. 

Baidu said the growth arrived “despite the weak macro environment”. After witnessing its first quarterly loss since 2015 in its last quarter, it is clear the company is taking steps to stay competitive among tech rivals Alibaba [BABA] and Tencent [0700]. 

Baidu are focussing on improving its mobile platforms as more users move from desktop search. The company are also looking to use new platforms such as smart speakers and cars to continue rolling out its ‘DuerOS’ voice assistant.

New ventures are essential for the company, as its core business – online marketing revenue – declined by 9% this quarter.

 

iQiyi plunges on spending increase

The Baidu-backed video streaming specialist fell by 10% in after-hours trading as worry about its spending continues. 

It reported a net loss of $339m, or $0.49 per share, missing analyst expectations which had pinned its losses at $0.45. The loss was deeper than the $310m it reported for its year-ago quarter.

 

Market cap $12.86bn
PE ratio (TTM) 16.62
EPS (TTM) 1.06
Quarterly Revenue Growth (YoY) 43.30%

iQiyi share price vitals, Yahoo finance, 20 August 2019

 

iQiyi was also hit by a decline in online advertising services revenue, which fell 16% on a year-over-year basis to $321m. 

The streamer’s plunge in the market arrives despite the fact that it posted a 15% revenue rise to $1.01bn. This was aided by a 50% increase in its subscriber base that now includes over 100 million people, which contributed to a 38% improvement in membership services revenue.

 

Weibo gained on strong earnings, user growth

Weibo’s share price was up 8% in early hours trading on Monday, following the news that it beat analyst expectations on earnings per share. On a non-GAAP basis, EPS arrived at $0.68, compared to the FactSet consensus of $0.60. The stock finished 14% up on Monday from Friday’s close.

The positive results were largely down to user growth, according to CEO Gaofei Wang. “We are delighted to see a notable acceleration in user growth from the prior quarter and robust user engagement trends, underpinned by our strengthened social network effect as well as the consistent efforts in user product upgrade and optimisation," he said.

Monthly active users grew 13% to 486 million in June, while average daily active users rose 11% to 211 million. 

Elsewhere the company missed revenue estimates, climbing 1% to $431.8m. Weibo assured investors that it expects an increase in net revenue of 6-9% in the coming quarter, however.

Despite its slumping performance in the market over the past year, analyst consensus on the stock is positive. Out of 23 analysts covering the stock, the consensus rating is ‘buy’.

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