Please ensure Javascript is enabled for purposes of website accessibility

Why Baidu's Stock Rose 16.4% in November

By Anders Bylund – Dec 3, 2019 at 4:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Chinese titan of online services posted steep year-over-year drops in the third quarter, but analysts had expected even worse. Was this the start of a serious turnaround?

What happened

Shares of Baidu (BIDU 3.55%) gained 16.4% in November 2019, according to data from S&P Global Market Intelligence. The Chinese search engine giant sparked that surge with a solid third-quarter earnings report, which lifted its share prices by 12% in a single day.

So what

In the third quarter, Baidu's earnings fell 35% year over year, landing at $1.79 per diluted share. Revenue declined by 4.4% to $3.93 billion. But your average analyst had expected even deeper drops, to the tune of earnings near $1.11 per share on approximately $3.88 billion in top-line sales.

A young Asian woman on a train uses a laptop and a smartphone.

Image source: Getty Images.

Now what

Despite the lower headline figures, Baidu posted plenty of positive growth in this report. The number of daily active users of its search apps rose 25% to 189 million, and the volume of voice queries multiplied by 4.5 times to 4.2 billion searches. As long as these fundamental metrics continue to rise, Baidu should be able to turn around the negative trends in sales and earnings over time.

The stock still trades 42% below its 52-week highs, pegged to the very reasonable valuation multiple of 16 times forward earnings. My fellow Motley Fool Leo Sun argues that the worst should be behind Baidu by now, though the road ahead most certainly won't be smooth.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Baidu. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.