Baidu on the Cusp of Entering the $100 Billion Club: A Matter of Time
Yesterday, Baidu released its 2013 Q4 earnings report, showcasing a steady revenue growth trajectory that has put the company on the cusp of entering the coveted $100 billion club. The report highlights Baidu’s continued investment in strategic areas such as technology, mobile, cloud, and video, which are expected to yield significant returns in the future.
Revenue and Profit Growth
The Q4 earnings report revealed a total revenue of $1.55 billion, a 50% increase year-over-year, with net profit of $452.6 million, a 0.4% decline compared to the previous year. The full-year revenue of $5.209 billion represents a 43% increase, while net profit of $1.718 billion marks a 0.6% increase over the previous year. The positive feedback from the capital market has led to a significant increase in Baidu’s share price, reaching a high of about $179.
Analyst Predictions
Merrill Lynch has maintained a “Buy” rating for Baidu, with a target price raised to $199. The analysts predict that Baidu’s revenue growth trend will continue, driven by its aggressive marketing strategies. Pacific Crest also rates Baidu as a “Buy,” stating that the company’s investment in key strategic areas will eventually pay off.
Baidu’s Steady Growth
Baidu’s steady growth in liquidity and profitability is a testament to its ability to maintain a stable income growth rate of between 42% and 50% for two consecutive years. This is attributed to the increasing use of search engine marketing by advertisers, which has led to a rise in advertising spend on search engines. The average revenue per user (ARPU) values are still rising, indicating a strong demand for Baidu’s services.
Investment in Future Growth
Baidu’s investment in future growth areas such as technology, mobile, cloud, and video is expected to yield significant returns. The company has continued to spend money in these areas, with a focus on research and development, mobile products, content acquisition, and stock compensation expenses.
Key Strategies
Baidu’s future growth strategies include:
- Technology: Developing new technologies to push mobile payments, play O2O, and snatch offline resources.
- Online Video: Investing in iQIYI and PPS to become a leading player in the online video market.
- Cloud +: Expanding its cloud services to provide a comprehensive platform for mobile applications.
Mobile Liquidity and Profit Margins
Baidu’s mobile revenue has exceeded 20% of its total revenue, with a share of Google’s mobile revenue likely to be at a similar level. The company’s mobile liquidity is expected to break out, with profit margins rebounding in the future.
The Search for Growth
Baidu’s search business is expected to be a key growth driver, with the company’s unified search platform providing a solution for fragmented and long-tail demand. The arrival of 4G will further accelerate the growth of mobile search, with voice, image, and multimedia search, and LBS expected to experience explosive growth.
Conclusion
Baidu’s steady revenue growth, investment in future growth areas, and focus on key strategies position the company for success in the mobile Internet era. With its unified search platform, online video, and cloud services, Baidu is well-equipped to become a leading player in the mobile Internet market, with a potential profit margin rebound in the future.