Chinese Baidu shares up after second-quarter earnings in 2019

Baidu's shares grew by more than 8% in after-hours trading after posting Q2 earnings above market expectations, thanks to the ability to push out more recent rivals, such as TikTok's parent company, ByteDance, in advertising.

Here are the results for the June quarter:

• Revenue of 26.3 billion yuan, or $ 3.83 billion, according to the exchange rate published in the release on the company's results. This represents an increase of 1% in one year or 9% over the quarter. Revenues exceeded market expectations of 25.76 billion yuan.
• Earnings per share of 10.11 yuan, exceeding estimates of 6.12 yuan. This represents a 54% drop from the previous year, but an increase of over 260% over the previous quarter.

Expectations were low. The stock had fallen nearly 40% this year and investors were worried about the impact of increased competition and stricter censorship by the Chinese government on online videos, which could hurt advertising revenues.

But Baidu reported figures that pleased the market. After recording its first loss since 2005 in the first quarter of the year, the Chinese internet giant returned to net profit in the second quarter.

Its core business of advertising and marketing services posted sales of 19.5 billion yuan, down 2 percent year-on-year but up 12 percent in the quarter. Since this accounts for about three quarters of the company's business turnover, the signs of stabilization have been hailed.

The search giant has also been criticized for its slow shift to mobile as consumers spend more and more time on what is called "super applications". These are products such as Tencent's WeChat or Ant Financial's Alipay, in which a user can perform different tasks, from payment to ordering food, all in one application.

Baidu was also faced with the new competition of ByteDance, owner of the social media application TikTok, which recently launched a research product.

Faced with this competition, Baidu has managed to record strong growth for its own mobile application, which contains everything from research to videos. Daily active users for its application reached 188 million in June, an increase of 27% year-on-year. Search queries in the app have increased by more than 20%.

Baidu 's streaming service, iQiyi, also registered a number of subscribers of 100.5 million in June 2019, up 50% from one year to the next.

"In recent months, faced with serious external challenges and a weak macroeconomic environment, the company has initiated a series of changes, including organizational structure, staffing and corporate consolidation," he said. said Robin Li, CEO of Baidu, in a letter to employees. "These changes have caused temporary suffering, but the positive impact will be significant, allowing Baidu to have a stronger and more sustainable future."

Nevertheless, Baidu is not yet out of the way, the advertising market should face headwinds.

"I would say that this quarter's results are simply" less bad "or better than investors feared," said Xueru Zhang, principal analyst at 86Research, CNBC. "The advertising market is still showing no sign of recovery, and what Baidu can do is improve its own products."

"At least (the) performances of the top line have stabilized (in terms of) growth from one quarter to the next, while, from one year to the next, it remains difficult in the second half of 2019, "added Zhang.