Author Archives: Scalper1
Baidu Spending In Its ‘Online-To-Offline’ Push Will Be Focus In Q4
When Baidu ( BIDU ) reports Q4 earnings after the close on Tuesday, investors will get another look at how the aggressive online-to-offline e-commerce push of China’s largest search company is faring. In June 2015, Baidu announced that it would invest $3.2 billion over the next three years to bolster its lineup of O2O by fortifying group-buying website Nuomi, which Baidu acquired for $160 million in 2014. Baidu has said its big spending effort will pay off because its vast abilities in search will eventually translate to revenue from business commissions. The O2O business model aims to attract customers online, then direct them offline to physical stores and to services including health care and food delivery. “Ultimately, what Baidu is building and offering is much broader than a daily-deals business,” Baidu CEO Robin Li told analysts during a conference call after the company posted Q3 earnings in October. “We are creating an online-marketing and transaction-services platform, bringing to bear the power of our entire platform across search, maps, Nuomi, Takeout Delivery and Baidu Wallet. Our platform benefits from shared synergies, with traffic and data from search and maps enhancing the growth of our newer products.” Banking On O2O To Compete Baidu is banking on its O2O business to help it compete in China’s burgeoning e-commerce arena vs. China e-commerce leader Alibaba Group ( BABA ) and others. But Alibaba, too, has invested heavily to develop its online-to-offline retail capability. Other major China Web companies fortifying their O2O offerings include JD.com ( JD ) and Tencent Holdings ( TCEHY ). Analysts also want to find out how Baidu’s efforts to penetrate into the lucrative market of mobile apps are coming along. Baidu has been slow to advance into mobile apps, while China tech heavyweight Tencent has emerged as the top rival to Baidu in mobile search, according to a report on Jan. 22 from Nomura, which handed Baidu a price target cut and rating downgrade. ‘The Potential Threat’ “Who is the potential threat for Baidu on mobile? We believe it’s Tencent, rather than any of the existing search engines,” wrote Nomura analyst Jialong Shi in that industry note. “Baidu is trying to penetrate into mobile apps, but so far progress has been slow. Based on our checks with industry experts, the challenges for in-app search mainly lie in two aspects — immature technology and reluctance of app developers.” Nomura lowered its price target on Baidu stock to 180 from 200 and cut its rating on Baidu stock to neutral from buy. For Q4, Baidu has guided revenue of between $2.864 billion and $2.95 billion, up between 29.5% and 33.4% year over year in local currency, to between 18.2 billion and 18.75 billion Chinese renminbi. Analysts polled by Thomson Reuters are expecting Baidu to report Q4 revenue of RMB 18.59 billion, up 32% year over year in local currency, with Q4 EPS (GAAP) of RMB 6.60, down 26% year over year. For Q1, analysts polled by Thomson Reuters are expecting Baidu to report revenue of RMB 16.47 billion, up 29% year over year in local currency, with Q1 EPS (GAAP) of RMB 5.48, down 18% year over year. Internet Finance Initiatives Credit Suisse analyst Dick Wei boosted Baidu’s price target to 251 from 210 in mid-December, pointing to positive “traction” in both Baidu Nuomi and the company’s iQiyi video wing. Wei said iQiyi went from 5 million paid users in June to 10 million paid users on Dec. 1, while Baidu Nuomi had attained 11.2% of the online movie-ticket-booking sector. The company’s new Internet finance initiatives are also growing, Wei said. In November, Baidu announced its partnership with China Citic Bank to establish a direct sales bank, Wei said, while by the end of September, the number of registered users for Baidu Wallet reached 45 million, a 520% increase year over year. “We are positive on Baidu’s continued investment in this space,” he said. Baidu stock closed at 145.34 on Friday, down 4.8%. Instability in the Chinese stock markets and investor concern about the company’s O2O spending have helped drag down the price of Baidu stock 33% since this time last year.
Twitter Advertising Growth, User Numbers, Under Pressure In Q4?
When Twitter ( TWTR ) reports earnings on Wednesday, analysts will be looking to see if the social media firm known for its global reach has managed to boost its user numbers. During the past year, Twitter has brought in a new CEO, made numerous other executive suite changes, acquired new companies and added new services. Still, its user numbers are expected to remain stagnant in Q4, and Twitter remains under fire from Wall Street. Twitter stock has remained below its 2013 IPO price of 26 since November as analysts worry about the impact that sluggish user growth will have on Twitter’s profitability, as the microblog’s user base could affect its ultimate ability to charge for ads. “We believe positive ad pricing trends drove Q4 revenue towards the high end of guidance, but user growth likely was stagnant,” wrote Wedbush analyst Michael Pachter on Friday in an industry research note. On Friday, Twitter stock tumbled to close at near a record low after getting a price target cut from Wedbush. The investment bank predicts that Twitter won’t show meaningful user growth when it reports Q4 earnings, because the service remains too hard for the average user to figure out, compared to other social media. Monthly active users of the service — excluding SMS Fast Followers who can get tweets on their phones without being registered users — rose by just 5 million to 307 million from Q1 to Q3, Pachter wrote. He doesn’t appear to have high hopes for Moments, the service that Twitter launched last fall to showcase hot news topics and draw more non-registered users to the site. “We do not think that Moments drove a meaningful increase in users, as much of the content remains outdated or irrelevant,” said Pachter. Attrition of high-level staff is also a concern. In late January, Pachter said, Twitter CEO Jack Dorsey announced that the SVP of Engineering, SVP of Product, VP of Global Media and VP of Human Resources had all “chosen to leave,” with the GM of video service Vine also departing. “We believe that had Moments been an early success, the executives would not have left so soon, voluntarily or otherwise,” Pachter said. He said that since Facebook ( FB ) reported that its average price per ad was up 21% year over year in Q4 — with the increase driven in part by the shift to mobile — “positive ad pricing trends drove Q4 revenue towards the high-end of guidance” for Twitter, too. Wedbush cut its price target on Twitter stock to 20 from 30, and Pachter maintains a neutral rating on Twitter stock. Advertising, which makes up 90% of Twitter’s total revenues, will “see continued deceleration over time,” wrote RBC Capital Markets analyst Mark Mahaney in a report on Friday. “Our concern for some time has been that Twitter’s lack of real-time commercial intent (a la Alphabet ( GOOGL )-owned Google) or detailed, authentic profiles (a la Facebook) will eventually limit Twitter’s growth potential.” Mahaney said that he expects Twitter to generate $2.02 for every monthly active user in Q4 vs. Facebook’s $3.59, compared with $1.60 and $2.83 in Q3. Analysts polled by Thomson Reuters are modeling Twitter to post revenue of $709.9 million, up 48% year over year. The consensus opinion is that Twitter’s EPS ex items will remain flat year over year at 12 cents. For Q1, analysts polled by Thomson Reuters expect Twitter to see revenue rise 44% to $629.3 million and post EPS ex items of 8 cents, up 14% year over year. In late January, Cantor Fitzgerald analyst Youssef Squali said that Twitter’s muted stock price might prompt a buyout of the social media company. “Twitter’s current valuation, unique offering and sizable user base makes it a strategic asset for a number of potential buyers, be they technology or media companies,” wrote Squali, who maintained a buy rating on Twitter stock. He said a buyout of Twitter is a little easier than for some other companies because “there is no concentration of share ownership and no super-voting structure, with the top three shareholders owning 6.4%, 5.1%, and 5.0%, respectively.” Besides Facebook, Squali says potential suitors for Twitter, which has a market value near $11 billion, include tech companies Alphabet and Microsoft ( MSFT ), as well as media companies Twenty-First Century Fox ( FOXA ), Walt Disney ( DIS ), Comcast ( CMCSA ) and Time Warner ( TWX ). Late Friday, Buzzfeed reported that Twitter might abandon its reverse chronological timeline display and switch to an algorithimic system.