Commentary on Political Economy

Thursday 13 August 2020

...and bye bye Baidu!


Baidu revenues extend fall into second quarter

Even as the coronavirus pandemic has propelled gains for its competitors, Baidu’s share price has slid about 1.5 per cent this year © Reuters

The Chinese search giant Baidu’s sales continued to shrink in the second quarter as China’s economic recovery failed to bring back advertisers.

The Beijing-based company’s reported revenue fell 1 per cent year on year to Rmb26bn (about $3.8bn), ahead of the Rmb25.8bn forecast by analysts. Still, it marks an improvement after China’s coronavirus lockdown caused the group’s first-quarter revenues to fall by 7 per cent. Net profits grew 48 per cent to Rmb3.6bn.

“With Covid-19 becoming more manageable in China, Baidu’s business is steadily rebounding,” Robin Li, chief executive, said.

Separately, iQiyi — the online video platform owned by Baidu and representing about 28 per cent of the group’s quarterly revenue — said it was co-operating with the US Securities and Exchange Commission, which has made a request for documents after a research report in April from a short-seller backed by Muddy Waters Capital.

iQiyi said it had engaged advisers to conduct an internal review of allegations made in the report from Wolfpack Research.

US-listed shares in iQiyi fell more than 13 per cent in after-hours trading. Baidu was down more than 5 per cent.

Even as the coronavirus pandemic has propelled gains for its competitors, Baidu’s share price has slid about 1.5 per cent this year, bringing its market value to about $43bn. 

David Dai of Bernstein Research recently noted the company’s shares remained well undervalued but added it faced structural risks such as the decline of search in China and advertisers migrating away from the platform.

In mobile-dominant China, users now spend an increasing amount of time in walled-off apps built by its competitors for short video, news, messaging, shopping and other activities, each with powerful search functions of their own.

Baidu has said it was considering a secondary listing in Hong Kong or another venue, and analysts hope a listing closer to its home market could help support its share price.

Meanwhile, the Trump administration has issued recommendations to ban Chinese companies that do not comply with US accounting standards from American stock exchanges.

The proposals would force Chinese companies to delist from US stock markets unless regulators get access to their audits and could come into force at the end of 2021.

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