Baidu (NASDAQ:BIDU) reports its Q1 results on May 16. The company had beat consensus expectations on revenue and EPS in Q4. look for commentary around progress in the management’s aim of increasing the amount of artificial intelligence component in its products, as this should allow the company to offer services that are more aligned with consumer preferences while also reducing costs. Per Trefis estimates, Baidu’s shares have a fair value of $189 per share.
Baidu makes money through advertising and content subscription services. The company also has other developing avenues of revenue generation such as cloud and autonomous driving. There are two main segments of Baidu’s revenue ($15 billion in 2018).
Baidu Core (fiscal 2018 revenue of $11 billion, 76% of total revenue): Segment revenues are derived from advertising income and related services for merchants. Baidu continues to be the largest search engine in China with a market share of roughly 70%.
Revenue trends and fiscal 2019 expectations
Baidu added $5 billion in total revenue from 2016 to 2018
Revenue growth was driven by Baidu Core, adding $3 billion in revenues over the same period at 15%. We expect revenues for the segment to $12 billion (+7% y-o-y) in 2019.
Baidu’s EPS figure for full-year 2019 to be $7.42. Taken together with our forward P/E multiple of 26x for the company, this works out to a $189 per share price estimate for the company’s stock, which is about 25% above the current market price. The sizable difference can be attributed to the sell-off in Chinese company stock over recent weeks due to heightened fears of a full-blown U.S.-China trade war.