Expect Soft Results From Baidu As It Seeks To Capture The Cloud

Citi’s Alicia Yap expects Baidu Inc (ADR) BIDU to report its Q3:16 results either in line with expectations or slightly below the consensus forecasts when the company announces its results on October 27.

Yap maintains a Neutral rating on the company with a price target of $196.

Capturing The Cloud

Yap noted that Baidu has been focused on rebranding Baidu Cloud, launching the medical AI Chabot and establishing Baidu Capital, in order to capture opportunities around Cloud, AI and Big Data.

“While we believe some of these strategic moves could potentially strengthen Baidu's overall business in the long term, we remain cautious on the near-term growth outlook due to stricter controls on account reviews and policies,” the analyst went on to say.

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Q3 Expectations

Yap expects Baidu to report its Q3:16 gross revenue at Rmb 18.21 billion, in line with the guidance but below the consensus expectations.

The non-GAAP EPS for the quarter is expected at Rmb 6.82, again below the consensus forecast, with non-GAAP operating margins of 15.2 percent.

Guidance

“Given the on-going transition of its medical keywords impact and the uncertainty about the various approval timing of “advertising examination form”, we believe 4Q16E revs guidance could also be either in-line or slightly below consensus expectation,” the analyst mentioned.

For Q4, Yap expects revenues of Rmb 19.36 billion, with non-GAAP EPS of Rmb 7.32, below the consensus expectations.

“We believe Baidu is likely to provide 4Q16E rev outlook largely in-line or slightly soft compared to consensus expectations,” the analyst added.

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