A decrease in operational and bandwidth costs enabled Chinese search engine Baidu, Inc. (NASDAQ: BIDU) to report better-than-expected fiscal 2017 fourth-quarter results. With this, Baidu has surpassed analysts’ estimates throughout fiscal 2017. Based on the strong results and impressive partnerships acquired in its autonomous driving vehicle venture, we anticipate the stock of Baidu to move up in the short-term. The stock ended Wednesday’s trading session at $245.89.
The Beijing-based company reported Q4 2017 revenues of RMB23.56 billion ($3.62 billion), up 29% from RMB18.21 billion in the year-ago period. The Wall Street analysts had expected revenue of RMB 23.053 billion.
During the fourth-quarter of 2017, Baidu posted earnings of RMB 5.23 billion, compared with RMB 4.61 billion in the similar period last year. On a per-share basis, 4Q17 earnings of RMB 14.90 ($2.29 per share) were greater than RMB 13.23 per share in the year-ago period. The reported figures surpassed analysts’ estimates of RMB13.38 per share.
During the recent quarter, Baidu’s video streaming division iQiyi filed for a possible IPO in the US.
The company released Apollo 2.0, an autonomous driving platform that supports simple urban road conditions. So far, Apollo has gained 90 partners, which includes some of the leading names in autonomous driving. Furthermore, China’s Ministry of Science and Technology has designated Baidu’s Apollo as the national autonomous driving open platform.
Baidu, NVIDIA, and ZF are developing an AI autonomous vehicle platform that is customized for China. The collaboration is based on Baidu’s Apollo Pilot, an autonomous driving system targeted for mass production. The company has plans to set up the Apollo Fund, with an investment of RMB 10 billion ($1.50 billion). The fund will invest in the expansion of Apollo’s ecosystem.
The company also released version 2 of the DuerOS platform, which offers enriched solutions. DuerOS is currently used by more than 130 partners of Baidu. As many as 50 DuerOS-powered hardware products, including televisions, smartphones, speakers, headsets, etc., are being developed by Baidu’s partners.
During the quarter ended December, the company launched raven H, a smart speaker. Baidu has also formed a strategic partnership with NVIDIA to enable NVIDIA SHIELD launched in China to be equipped with Baidu’s voice assistance DuerOS.
For the current (1Q18) quarter, Baidu expects net revenues to be between RMB19.86 billion ($3.05 billion) and RMB20.97 billion ($3.22 billion), representing a 25% to 32% increase year over year. Baidu has adopted a new revenue accounting standard (ASC 606). Under the old standard, the forecast would have been $3.24 billion to $3.42 billion.
Analysts expect revenue of $3.40 billion. Therefore, robust Q4 revenues, impressive partnerships for the autonomous driving vehicle project, collaboration with NVIDIA, and upbeat 1Q18 outlook turns Baidu bullish.
The stock has started moving upwards after receiving support at 216. The momentum is also crossed above the reading of 100. Therefore, a continuation of the current uptrend is expected.
To benefit from the current uptrend, we may park our surplus funds in a call option, which is valid for a period of one week. The call option will be picked up from a binary broker when the stock of Baidu trades near $235 in the NASDAQ.
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.
