Social Market Analytics Looks at Analyst Downgrades and Recovery for Baidu, Inc.

This week, Social Market Analytics (SMA) looks at Baidu, Inc. BIDU, a provider of Internet search services.  The company offers Chinese and Japanese language search platforms on its websites, Baidu.com and Baidu.jp, and products for community focused search, mobile search, e-commerce, entertainment, and related software.  Starting on October 8 and continuing for the week, BIDU shareholders experienced considerable volatility as the stock was downgraded to underperform by Credit Suisse, but subsequently entered a three day rally, which faded the initial market reaction from the downgrade.  BIDU went from being one of NASDAQ’s biggest losers on October 9 to end the week as the leader in the Internet sector as cooler heads prevailed, recognizing the company’s robust growth in earnings, revenue, net income and profit margins.  During the week, BIDU appeared on SMA’s morning Flash Report, which identifies stocks, in the pre-market, with extreme sentiment levels that are likely to trade with high activity during the upcoming session.  In the pre-market of October 9, our analytics engine identified BIDU as a stock with high negative sentiment from the universe of stocks tracked by SMA.  As the week progressed, SMA’s metrics provided initial indication of negative market sentiment for BIDU and later confirmation of a reversal as traders evaluated the emerging viewpoints expressed on the stock.

Beginning on October 8, SMA’s S-Score for BIDU entered a steep downtrend leading to negative territory. In the pre-market of October 9, BIDU’s S-Score fell sharply to -2.96 (High Negative).  Concurrent with this development, BIDU’s S-Volume metric posted a significant spike up above average levels seen over the previous five days, indicating unusualsocial media activity for the stock.  BIDU gaped down at the open to $110.66, a loss of 3.18%, and continued to sell off rapidly to close at $106.49, down 6.83% for the day.  The behavior of SMA’s S-Factor metrics measures market trading sentiment and can provide actionable signals for upcoming price movement.  On October 10, BIDU’s S-Score reversed trend, moving higher to reach positive territory in the pre-market of October 11.  BIDU opened at $109.52, traded flat and ended the day at a slight loss.  In the pre-market of October 12, BIDU’s S-Score maintained positive levels.  The stock opened on October 12 at a modest gap up, but continued to rally, ending the session and the week at $111.22, recovering 60.6% of the market reaction to the analyst’s downgrade.

Social Media data are noisy and complex.  A single metric is insufficient to understand sentiment behavior over time.  Our S-Factors are a family of metrics, including volatility, trend and volume measures, designed to provide a complete view of social media signature for each security tracked in SMA’s databases.  SMA's processing engine continuously updates our S-Factors, capturing overnight and pre-market sentiment activities. Clients receive sentiment reports prior to the U.S. market open and intra-day sentiment estimates for tracked stocks, on-demand.   We invite the reader to visit our website; investigate our market sentiment metrics for BIDU, other stocks, industry sectors, and market indices; participate in our FAQ forum; and sign up for our Flash Report and Newsletter.