Why Baidu Inc (NASDAQ: BIDU) stock is under pressure

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Baidu Inc (NASDAQ: BIDU) stock lost over 4.5% on Feb 22nd, 2019 (as of 10:44 am GMT-5; Source: Google finance). Operating income was RMB 1.1 billion ($162 million), decreasing 77% year over year, and operating margin was 4%, compared to 21% in Q4 2017. Operating income of Baidu Core was RMB 4.4 billion ($645 million), decreasing 26% year over year, and operating margin was 22%, compared to 33% in Q4 2017.

Overall, fourth-quarter profit dropped 50% to 2.08 billion yuan ($303 million), or 5.93 yuan (86 cents) an American depositary receipt, largely tied to non-controlling interests in video-streaming service iQiyi, which went public last year. Free cash flow was RMB 27.2 billion ($3.96 billion). Excluding iQIYI, free cash flow was RMB 24.9 billion ($3.62 billion).

BIDU in the fourth quarter of FY 18 has reported the adjusted earnings of 13.18 yuan an ADR.

The company had reported the adjusted revenue growth of 22 percent to $3.96 billion in the fourth quarter of FY 18. Total revenues of Baidu Core were RMB 20.5 billion ($2.98 billion), increasing 14% year over year, or 20% year over year excluding the impact of announced divestures. Online marketing revenues were RMB21.2 billion ($3.08 billion), growing 10% year over year. Baidu had approximately 529,000 active online marketing customers, increasing 15% year over year. Revenue per online marketing customer was approximately RMB 40,100 ($5,800), declining 4% year over year. Other revenues were RMB 6.0 billion ($872 million), increasing 104% year over year, which was mainly due to the robust growth in iQIYI membership services, cloud and other businesses.

Additionally, Baidu App daily active users (“DAUs”) reached 161 million in December 2018, increasing 24% year over year. Baijiahao, or BJH accounts, Baidu feed’s content network, grew to 1.9 million publishers in December 2018, and includes People’s Daily, Xinhua News Agency, CCTV and multiple provincial media sources. Baidu Smart Mini Program monthly active users (“MAUs”) reached 147 million in December 2018, up 30% sequentially. Also in December, Baidu Smart Mini Program was open sourced to network partners. Haokan (short video) and Quanmin (flash video) DAUs reached 19 million and 4 million, respectively, in December 2018.

For the first quarter of 2019, Baidu expects revenue to reach 23.5 billion yuan to 24.7 billion yuan ($3.42 billion to $3.60 billion), compared with analysts’ projected 24.25 billion yuan, according to FactSet data.

Meanwhile, Baidu has completed US$1.25 billion in bond offerings in the fourth quarter 2018, consisting of US$850 million of 4.375% notes due 2024 and US$400 million of 4.875% notes due 2028, the proceeds from which will mostly be used to repay existing indebtedness.

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