Shares of Baidu (NASDAQ:BIDU) moved sharply higher on Friday following its clearly well-received quarterly report. The stock moved 10% on the day, and is now trading 24% higher since bottoming out below $140 earlier this month.
It was a big move for Baidu stock, even though the report itself was a mixed one at first glance. The quarter itself more than met Wall Street targets. Revenue clocked in at $2.9 billion, 33% ahead of the prior year. That was just ahead of analyst expectations, but it's also Baidu's weakest top-line growth as a public company. Year-over-year revenue growth dipped as low as 37% during the health services advertising shakeout of 2009 and hit 34% early last year, but 33% is a new low -- according to S&P Global Market Intelligence data.
The transaction with Ctrip (NASDAQ:CTRP) that took place during the quarter -- an exchange of Qunar (NASDAQ:QUNR) shares with Ctrip -- padded profits on a one-time basis. It whittled down Baidu's majority stake in Qunar into a minority stake in Ctrip, also resulting in the de-consolidation of Qunar's financials on Baidu's reported results. Back out the one-time gain and Baidu's adjusted profit came in at $1.18 a share, well below the $1.61 a share that it posted a year earlier but still nicely ahead of analyst forecasts.
Then we get to Baidu's outlook. It's forecasting between $2.379 billion and $2.465 billion in revenue for the current quarter, representing year-over-year growth of 21% to 26%. In short, the fourth quarter's distinction of being Baidu's slowest quarter of revenue growth as a public company won't last long.
Wall Street is presently perched at the high end of Baidu's range -- hence the initial "mixed" showing -- but there's more to the dot-com speedster's guidance than meets the eye. The top-line forecast is now free of Qunar's top-line contributions as part of the de-consolidation. Back out the online travel portal's impact on revenue from a year earlier, and Baidu's guidance would represent 28% to 33% growth. That may still translate into continuing decelerating growth, but it's still impressive.
Baidu's popularity continues to strengthen in the world's most populous nation, particularly in mobile. There are now 657 million mobile search monthly active users, and nearly half of them rely on Baidu for mobile maps. Baidu's success has helped open doors in most online categories, including financial platforms where Baidu Wallet has seen its user base nearly triple to 53 million over the past year.
The market isn't necessarily buying into Baidu's expanding reach in new niches. The stock got a boost earlier this year when its founder CEO and another exec offered $2.25 billion to take Baidu's majority stake in the growth yet profit-slurping video streaming site off its hands. This could be a sign of its future, as it improves its profitability by reducing exposure to some of its recent online-to-offline initiatives. Wall Street is renewing its love affair with Baidu, but it's something that the Chinese Internet bellwether is going to have to continue to earn on both ends of the income statement.
Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Baidu. The Motley Fool recommends Ctrip.com International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.