Baidu Shares Take a Hit as Management Adopts a Guarded Stance for 2024

On Thursday, Baidu, the leading Chinese search engine, saw its shares in the Hong Kong market take a significant tumble. This decline was a reaction to the company's management team expressing caution regarding the year ahead. Even with Baidu delivering financial figures that met expectations in its fourth-quarter report, the wary future outlook prompted a drop in share prices. Investors witnessed Baidu's stocks plummet by as much as 6.5% during the morning, although some of those losses were later recovered. By the market's close, shares had fallen by 4.3%, trading at 102.10 Hong Kong dollars (US$13.04).

Baidu's American depository receipts experienced an 8.05% decrease on Wednesday following the fourth-quarter earnings release. Since the start of the current year, the company's shares have seen a 12% decline.

For the last quarter, Baidu reported a 6% year-over-year increase in revenue, amounting to 34.95 billion yuan (US$4.86 billion). This uptick was fueled by both online marketing and non-online marketing divisions. However, net profits dipped by 48% to 2.60 billion yuan due to losses from equity method investments. Excluding certain expenses and fair-value adjustments for investments, the adjusted net income actually saw a 44% rise to 7.76 billion yuan.

The underwhelming forecast for 2024 arises from Baidu's concerns about China's wobbly macroeconomic conditions. The company's advertising-dominated revenue stream could be particularly vulnerable to the country's subdued consumption rates and signs of deflation. Baidu's CEO Robin Li emphasized the significance of substantial economic stimuli to hit this year's targets.

On a brighter note, Baidu envisages potential growth avenues with its foray into generative AI and large language models, highlighted by new products like the Ernie bot. Li highlighted modest revenue gains from these innovations in the fourth quarter, stemming from enhanced ads technology and enterprise services.

As Baidu leans into this cutting-edge technology, Li is ambitious about the prospects, forecasting revenue from AI and ads to scale up to several billion yuan in 2024.

Baidu, Shares, Earnings