Baidu stock is down: Can it recover from the latest drop?

Baidu Inc (BIDU) stock has lost nearly 13 percent of its value since reporting its financial results for the second quarter last week. The results were better-than-expected, but it was the sales outlook that disappointed investors. Baidu stock is currently trading around $142.96 with a market value of $49.759 billion. Overall, the company’s shares are down more than 33 percent on a year-to-date basis.

Q2 Highlights

The Chinese search engine giant reported a loss of 1.70 yuan per share for the quarter ended June 30, compared to earnings of 10.31 yuan per share for the comparable period of 2020. However, excluding non-recurring items, Baidu reported adjusted earnings of 15.41 yuan per share, mainly driven by the impressive performance of its artificial intelligence (AI) business.

Total revenue for the quarter jumped 20 percent on a year-over-year basis to 31.35 billion yuan. The results easily surpassed analysts’ average estimate of 13.09 yuan per share for earnings and 30.99 billion yuan for revenue.

If we look at the year-over-year performance of key businesses, revenue from the AI cloud segment climbed 71 percent, online market revenue jumped 18 percent, while iQIYI revenue inched up 3 percent. In comparison, non-online marketing revenue soared 80 percent in the quarter.

Sales Outlook

Baidu also released its revenue outlook for the third quarter and full-year along with its Q2 results. It expects revenue in the range of 30.6 billion yuan to 33.5 billion yuan for Q3, compared to the consensus forecast of 33.11 billion. For the full year, the company expects its revenue to grow in the range of 9-20 percent, versus growth of 19 percent estimated by analysts