Chinese technology giant Baidu, Inc.BIDU) is scheduled to release results for the second quarter of fiscal year 2022 on August 30, before the market opens. Baidu specializes in online services and products, as well as artificial intelligence (AI). BIDU shares have lost 9.3% over the past six months and are up 11.9% over the past five days.
The street is waiting Baidu will post adjusted earnings of $1.58 per share in Q2, which is well below the previous year’s figure of $2.39 per share. Meanwhile, revenue came in at $4.24 billion, a year-over-year decline of 12.5%.
Baidu’s website traffic trends for Q2 are weak
Website traffic tool TipRanks signals that Baidu is set to report weak Q2 results. According to the tool, total estimated visits to baidu.com dropped by a whopping 40.47% year-on-year in Q2. Weakness in website traffic continued in July, with a year-over-year drop of 21.16%.
What’s more, website traffic tool TipRanks shows that estimated year-to-date visits are down 18.90% year-over-year. These figures suggest that Baidu has a disappointing performance in the second quarter. There was also a a sequential drop in total estimated visits in the second quarter of 5.58%..
Possible catalysts for long-term growth
Notably, Baidu has received China’s first-ever license to commercially operate driverless robot taxi services on public roads. Apollo Go, its autonomous ride-hailing company, is licensed to operate unmanned robot taxis in Beijing, Chongqing and Wuhan. The company also plans to expand its operations to 65 cities by 2025 and to 100 cities by 2030.
Baidu boasts a robust AI Cloud business that develops applications for various verticals. The segment’s revenue grew 45% in the first quarter, demonstrating its strength in the market.
Also, on the regulatory front, concerns about the delisting of US-listed Chinese stocks have eased. US and Chinese regulators have signed a preliminary agreement to audit Chinese firms. According to reports, the deal will allow US regulators to inspect the audit records of Chinese companies in Hong Kong. It is expected that the procedure will start already next month.
What is Baidu’s stock price target?
At TipRanks, BIDU stock has a consensus rating of Strong Buy, based on 12 buys and two holds. The Baidu’s average target price is $205.07 implies 38.8% growth potential to current levels. BIDU has $275 highest (86.2% upside) and $155 lowest (4.9% upside).
End of thoughts
While there are several catalysts for Baidu’s long-term growth trajectory, near-term headwinds continue to dampen its performance. The current resurgence of COVID-19 in China and related lockdowns are affecting businesses. Moreover, inflationary pressures and slowing economic growth have curbed spending on advertising, which is one of Baidu’s biggest revenue drivers.
However, Baidu continues to significantly diversify into robotics and cloud AI business, and reduce its reliance on ad streams. This is the likely reason why analysts are very optimistic about BIDU stock as a potential long-term winner.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
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