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Baidu Inc ADR BIDU Stock Quote

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Morningstar‘s Stock Analysis BIDU

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Baidu Shares Appear Very Undervalued Amid Sustainable Margin Expansion; Maintain FVE at USD 183

Kai Wang, CFA Senior Equity Analyst

Analyst Note

| Kai Wang, CFA |

We maintain our fair value estimate for Baidu at USD 183 after the firm reported better-than-expected revenue of CNY 32.5 billion, which was 3% greater than our estimates, but was offset by a deceleration of artificial intelligence cloud revenue and sluggish progress in the autonomous driving business. Despite mixed results, we remain bullish on Baidu given the firm's non-GAAP operating margin expanded by 3% to 21.5% compared with our estimate of 17%. While management was noncommittal about whether margins are maintainable in future, Baidu's non-GAAP operating margins were 20%-23% in 2017-18 prior to allocating greater resources to build out its cloud and autonomous driving businesses, which are margin-dilutive. Margin expansion was due to staff cuts, lower channel and promotional spending, and allocation of the budget to higher-margin businesses—none of which appear to be on a one-time basis, which leads us to believe operating margin increases are maintainable in 2023 and beyond. 

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Key Statistics BIDU

Company Profile BIDU

Business Description

Baidu is the largest internet search engine in China with 84% share of the search engine market in September 2021 per web analytics firm, Statcounter. The firm generated 62% of revenue from online marketing services from its search engine in 2020. Outside its search engine, Baidu is a technology-driven company and its other major growth initiatives are artificial intelligence cloud, video streaming services, voice recognition technology, and autonomous driving.

No. 10 Shangdi 10th Street, Baidu Campus, Haidian District
Beijing, 100085, China, People's Republic of
T +86 1059928888
Industry Internet Content & Information
Most Recent Earnings Sep 30, 2022
Fiscal Year End Dec 31, 2022
Employees 45,500

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