Chinese internet firm Baidu (BIDU) will release its Q2 2024 financials on August 22. Analysts forecast that the company will report diluted earnings per ADS of $2.59, down from $2.76 in the same quarter last year. However, analysts expect revenues of $4.75 billion, reflecting an 8.7% year-over-year decrease, according to TipRanks’ data.
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In terms of share price growth, BIDU stock decreased 29.6% over the past year and 26% year-to-date. Nevertheless, Baidu has maintained a strong record of earnings surprises, surpassing estimates in each of the last nine quarters.
Insights from the TipRanks Bulls & Bears Tool
There are reasons for investors to be cautious about revenue growth in Q2. According to TipRanks’ Bulls Say, Bears Say tool pictured below, bears argue that Baidu’s uncertain business model and insignificant robotaxi revenues, combined with the lack of generative AI monetization, are straining its advertising revenue. Additionally, a weak macroeconomic environment is causing Baidu’s revenue growth to fall slightly below market expectations.
Meanwhile, bulls are confident that Baidu’s AI strategies will succeed despite market skepticism and the challenges in China’s AI sector. They anticipate that supportive policies for autonomous driving will benefit Baidu, given its leadership in the robotaxi market. Furthermore, the expansion of AI-driven cloud services is expected to boost Baidu’s year-over-year cloud revenue growth.
What Do Options Traders Anticipate?
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you.
Indeed, it currently says that options traders are expecting a 6.09% move in either direction.
Is Baidu a Buy, Sell, or Hold?
Though analysts are concerned about the weak macro environment and revenue challenges, they remain confident that Baidu’s generative AI model will serve as a long-term earnings driver.
Overall, the Street has a Strong Buy consensus rating on Baidu stock, alongside an average price target of $131.25. However, analysts’ views on the stock may change once the company reports its Q2 earnings tomorrow.
