13:29 BIDU Baidu.com Q4 Earnings Preview (107.47 -1.14)
Top Points:Chinese internet giant Baidu.com is set to report Q4 earnings today after the close with a conference call to follow at 8:00pm ET. Current Capital IQ Consensus Estimate for Q4 sits at EPS of $1.29 on revs of $995.52 mln. Co guided for Q4 revs of $979-1010 mln in last quarter's earnings press release, representing a 37.6-41.8% YoY increase.BIDU typically guides for next quarter revs in its press release. Capital IQ Consensus Estimate calls for Q1 revs of $958.89 mln.Secondary plays include QIHU, GOOG, YNDX.Key Points from Last Quarter:Co reported Q3 earnings of $1.37 per share, $0.09 better than the Capital IQ Consensus Estimate of $1.28; revs rose 51.9% YoY to $994.6 mln vs the $1000.95 mln consensus.Online marketing rev for Q3 were $993.8 mln, representing a 49.6% increase from the corresponding period in 2011.BIDU had ~ 390,000 active online marketing customers in Q3, representing a 28.3% increase from the corresponding period in 2011 and a 10.8% increase from 2Q2012.Rev per online marketing customer for Q3 was ~ $2,546, a 16.8% increase from the corresponding period in 2011 and a 3.2% increase compared to 2Q2012.Traffic acquisition cost (TAC) as a component of cost of revs was 85.6 mln, representing 8.6% of total revs, as compared to 8.0% in the corresponding period in 2011 and 8.3% in 2Q2012.Analyst Comments:On Jan 15, Maxim Group noted that local media reported that BIDU will likely invest in Kingsoft, an online security software developer. It is not clear whether BIDU will take a minority or majority stake. They believe that BIDU intends to support Kingsoft in order to take more share from the web security market, in which Kingsoft may account for less than 10%; its major competitor, QIHU, has ~ 90%. In addition, in Nov 2012, co announced that it was to buy stakes of its online video subsidiary, iQiyi. They estimate that iQiyi is loss-making to date and BIDU will likely continue or increase its investment in iQiyi in 2013, in order to compete again Youku Tudou (YOKU). Therefore, iQiyi should dilute BIDU's margins in the near term, compounding margin pressure from rising search competition and increase of overall investment.On Dec 19, Maxim Group initiated BIDU with a Sell and tgt of $80. With 80% rev and 72% traffic shares in Q3, as well as stellar growth and margin expansion since its IPO in 2005, they believe the co's operations may have peaked. With continued search penetration to the mass market, increasing mobile usage, rising competition, and an uncertain economy, BIDU may face difficulties achieving high growth while maintaining high margins. Given co's likely concentration on large advertisers, higher price sensitivity and diversified demand of small businesses should drive down BIDU's margins; also, domestic competitors will likely take more market share, slowing down co's growth.Heard cautious comments on BIDU earlier today at Piper Jaffray.Options Activity:Based on BIDU options, the current implied volatility is ~50% higher than its historical volatility (over the past 30 days). The current implied one-day change in the underlying stock is ~3.1% (weekly BIDU 110 straddle is $9). So far today, BIDU puts are slightly are outpacing calls (27.2K total calls have traded vs 30.8K puts).Technical Perspective:Stock has been in a multi-stage correction on larger timeframes, but still in the context of a larger upward trend off the 2008 lows. The recent bounce off of capitulatory movement under 100 has given way to lateral movement over recent weeks under the 200-day SMA (113.04). That should act as key resistance on a beat, with 117.50 also looming. Support is obvious at the 100-level, though maybe too obvious. The 50-day is upward sloping and comes through in the 101.50 area. |
