Baidu
Baidu's shares performed spectacularly during the initial months following the stock market bottom in March 2020. This was due to strength in tech stocks and investors' excitement about the company getting into the EV business. Of course, the bull market in Chinese tech stocks was terminated by the government's decision to enforce antitrust regulations, privacy laws, and reduce their influence.
Adding to this selling pressure were higher interest rates and inflation which led to a bear market in many growth and tech stocks. As a result, Baidu's shares are down 56% from its peak in February 2021.
Inside the Numbers
In Q4, Baidu reported $1.84 in earnings per share which were above analysts' estimates of $1.40 per share. Revenue increased by 9% to $5.2 billion. The results were an encouraging sign that its transition is going well from an online marketing company to a supplier of tech for various industries like cloud computing and autonomous driving.
Revenue from non-advertising businesses, including its cloud segment, was up 63% vs 1% growth in advertising. AI cloud revenue rose 64% to $2.4 billion in 2021. In contrast, Baidu is losing the competition for eyeballs to companies like Tencent
The company is also planning to unveil its prototype for its autonomous EVs and announced plans to launch a driverless, taxi network in major cities in the coming months which investors are hoping could be another growth channel.
Baidu's core search business has likely peaked although it will remain a cash cow for the company. The key is that the company needs to productively invest in new initiatives for the next decade or 2 of growth. This report is a positive step in that direction.
