Last week, Chinese internet search engine provider Baidu Inc (NASDAQ: BIDU) reported fiscal 2017 first-quarter earnings and revenue that topped analysts’ estimates. Still, the stock fell 4% to close at $180.23 on Friday. The company reported slightly lower online marketing revenues compared to last year’s similar period. That caused a selloff. However, considering the details provided underneath, we anticipate the stock to gain ground in the short-term.
The Beijing-based company reported fiscal 2017 first-quarter revenues of RMB16.89 billion ($2.454 billion), up 6.8% from RMB15.82 billion in the corresponding quarter last year. Analysts at Wall Street anticipated Baidu to report revenues of $2.44 billion.
Baidu posted a net income of RMB1.78 billion ($258.1 million) in the recent quarter, compared with RMB1.99 billion in the same period last year. On a per-share basis, the recent quarterly earnings of RMB46.29 per share (RMB4.63 or $0.67 per ADS) were lower than RMB53.82 per share (RMB5.38 per ADS) announced in the quarter ended March 2016.
Excluding charges, on a non-GAAP basis, Q1 net income increased to RMB2.39 billion ($347.2 million) or RMB6.85 per ADS ($1 per share), from RMB2.36 billion or RMB6.80 per ADS. The non-GAAP earnings per share were higher than analysts’ estimates of $0.86 per share.
Online marketing revenues for 1Q17 declined 1.3% y-o-y to RMB14.738 billion ($2.141 billion). At the end of the March quarter, Baidu had approximately 451,000 active online marketing customers. Revenue per online marketing customer increased by 26.8% y-o-y to RMB32,200 ($4,678) in the second quarter.
Baidu also issued its fiscal 2017 second-quarter guidance. The company expects revenues of between RMB20.47 billion ($2.974 billion) and RMB20.98 billion ($3.048 billion) for the current quarter. That represents a growth of 12.1% to 14.9% on a y-o-y basis. The market is forecasting earnings of $3.03 billion for the second quarter. Thus, considering the revenue growth and positive outlook, fundamentally, a trader can expect further upside in the stock price.
The stock has bounced back after dipping below the major support level of 178. This indicates an active buying support in that region. The stochastic oscillator indicates a short-term oversold scenario. Likewise, the accumulation/distribution indicator is rising. This means that the accumulation is going on at the current levels. Thus, we can expect an uptrend in the stock price.
To gain from the forecast, a call option expiring on or around May 10th can be purchased. By timing the entry when the stock trades near $180 in the NASDAQ, a binary trader can establish the trade at an advantage.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
