Baidu Surprises With 3Q Sales Driven By China Recovery; Street Bullish

China’s internet giant Baidu reported 3Q adjusted earnings of $3.00 per ADS (American depository share), which jumped 61% year-over-year and topped analysts’ estimates of $2.05 per ADS. Sales of $4.16 billion grew 1% from the year-ago quarter and also beat the Street consensus of $4.14 billion.

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Baidu’s (BIDU) CEO Robin Li said “Our revenue growth turned positive in the third quarter with many advertising verticals turning around, putting Baidu in a good position to further benefit from a recovery in the Chinese economy.” He added that “Our new AI businesses saw healthy growth in the third quarter, particularly from cloud, where we are differentiating with AI solutions.”

Looking ahead, the company expects 4Q revenue to generate between $4.2 billion to $4.6 billion, which indicates a growth rate of -1% to 8% year-over-year. Analysts estimated 4Q sales at about $4.38 billion.

Separately, Baidu announced a deal to buy Joyy’s livestreaming business for $3.6 billion in cash to tap into the fastest-growing digital video market. The company expects the deal to close in the first half of 2021. (See BIDU stock analysis on TipRanks)

On Nov. 2, Goldman Sachs analyst Piyush Mubayi raised the stock’s price target to $162 (9.6% upside potential) from $144 and maintained a Buy rating. The analyst noted that according to QuestMobile, the Baidu app saw “robust user growth”, as its September monthly active users grew 17% to 546 million and the overall user time spend in 3Q rose 8% year-over-year. Mubayi believes that the “robust” user engagement is driven by Baidu’s continuous efforts on video content consumption.

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 6 Buys and 2 Holds. The average price target stands at $159.25, implying upside potential of about 7.7% to current levels. Shares have risen by about 17% year-to-date.