Could Baidu Stock start climbing now?

Baidu (BIDU) was one of the weakest Chinese technology leaders this year. While Baidu was down 34% on August 19th, Alibaba (BABA) grew by 30% and JD.com (JD) by 51%. The event Tencent Music Entertainment, which separated from Tencent and was released last December, is better than Baidu.

Second Quarter Results Boost Baidu Title

However, Baidu recently encouraged shareholders. In the second quarter, Baidu recovered sequentially from a $ 49 million loss to record earnings of $ 351 million, exceeding analysts' estimates. Baidu's shares surged after the company released the results.

Similar to Google (GOOGL) and Yandex, Baidu derives the bulk of its advertising revenue. In the second quarter, for example, advertising accounted for 73% of Baidu's total revenues.

While Google and Yandex advertising sales increased in the second quarter, this is not the case for Baidu. Its advertising revenue fell 9.0% year-on-year (year-over-year). The company's advertising activities have come under pressure from China's crackdown on online content. Caixin Global reports that the crackdown has led Baidu to remove billions of ads and articles from its platform. As we have seen before, the massive deletion of content may reduce traffic on Baidu platforms and affect the company's advertising activity.

Baidu diversifies outdoor advertising

Despite the pressure on Baidu's advertising sector, advertisers have many reasons to be optimistic about Baidu. The company is diversifying into new activities outside of advertising, which should isolate it from the weaknesses of the advertising market. The company has embarked on hardware by manufacturing smart speakers. According to Strategy Analytics, it is the third-largest supplier of smart speakers in the world. In addition, the global smart speaker market represents a $ 23.3 billion revenue opportunity for Baidu, according to Allied Market Research.

Baidu has also developed autonomous vehicles and put itself in the lead $ 285 billion hiking market. The company's goal is to launch its portering service with the help of autonomous vehicles in parts of China this year, reported Xinhua.

Baidu's diversification increased its non-advertising revenue by 44% year-on-year in the second quarter. In comparison, non-advertising revenues increased by 39% for Alphabet, Google's parent, and 36% for Facebook (FB) in the second quarter. We believe that Baidu's efforts outside of advertising could further increase its stock.