[Overseas Stocks Spotlight] "Baidu, a Year of Life and Death Due to COVID-19"

[Asia Economy Reporter Eunmo Koo] In the second quarter of this year, Baidu (Baidu·BIDU.US) saw a slowdown in revenue from its streaming platform iQIYI as the COVID-19 momentum faded. On the other hand, advertising performance showed signs of contraction again due to increased uncertainty about economic recovery following the resurgence of COVID-19 in the Beijing area in June, leading to a cautious outlook for online advertising demand through the end of the year. The delay in the recovery of online advertising and iQIYI’s performance suggests a lack of short-term catalysts for stock price increases.

Baidu’s revenue in the second quarter of this year was 26 billion yuan, down 1% compared to the same period last year, aligning with the guidance range of 25 billion to 27.3 billion yuan. Seunghye Baek, a researcher at Hana Financial Investment, explained in a report on the 17th, “Revenue from Baidu Core, the online advertising business, decreased by 3%, rebounding from a 13% decline in the first quarter, but still showed negative growth year-over-year. This was due to the resurgence of COVID-19 in the Beijing area in June, which increased uncertainty about economic recovery and caused online advertising demand to contract again.”

Revenue from the iQIYI segment, which contributed 28% of total revenue, increased by 4%, but the growth rate slowed compared to 9% in the first quarter. From the second quarter, external activities normalized completely except in some re-outbreak areas, causing iQIYI’s subscriber count, which had surged by 12% in the first quarter due to non-face-to-face benefits, to decline by 12% quarter-over-quarter. However, the achievement of net profit growth significantly exceeding market expectations through cost control this quarter is viewed positively.

The advertising performance is expected to be viewed conservatively through the end of the year. Researcher Baek stated, “Amid uncertainties about the resurgence of COVID-19 in China and the recovery of the domestic market, advertisers remain cautious about marketing expenditure. In particular, the travel and offline education sectors, which contributed significantly to Baidu’s advertising performance last year, are experiencing slower improvement compared to other sectors due to the global pandemic spread and shortened summer vacation and school breaks, keeping advertiser demand subdued.” She added, “Reflecting the uncertain market conditions, Baidu has set its second-quarter revenue guidance at 26.3 billion to 28.7 billion yuan, and the timing for a full-scale top-line rebound is likely to be the first quarter of next year.”

There is an assessment that short-term stock price momentum is lacking. Researcher Baek analyzed, “Although there is a lack of short-term stock price catalysts due to delays in the recovery of online advertising and iQIYI’s performance, the planned spin-off of AI and autonomous driving business units could serve as a catalyst for Baidu’s valuation reappraisal. Additionally, the secondary listing on the Hong Kong Stock Exchange and Tencent’s equity investment in iQIYI are factors supporting the stock’s downside.”

This content was produced with the assistance of AI translation services.