Before the Q3 financial report was released, overseas capital successively increased positions, Baidu launched a value revaluation battle
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On November 17, Beijing time, Baidu released its Q3 quarterly earnings report. According to the financial report, Baidu's revenue and profit indicators exceeded Wall Street market expectations. Although the performance of the quarterly earnings reports released this year has been pretty good, Baidu's market value seems to be almost "hot" in order to achieve a breakthrough.

Before the Q3 financial report was released, the capital market’s attitude towards Baidu quietly shifted, and many foreign institutions increased their holdings of Baidu. In August of this year, the well-known foreign institution Templeton Asset Management Ltd increased its holdings of 111.9 million shares of Baidu stock; at the end of September, Assenagon Asset Management SA and T. Rowe Price International Ltd both increased their holdings of Baidu stock on the same day, the number was 167,500 shares respectively. And 99,600 shares.

In the past, some investors and media had a pessimistic view of Baidu’s market value. This time, putting aside the stereotypes of Baidu from the outside world, the signal released through its earnings report , Maybe we can explore whether we have reached the point of re-examining the market value of Baidu?

Revenue shows a U-shaped reversal, and Baidu’s performance fundamentals are approaching an inflection point

After Ali, Tencent, and JD.com have released their earnings reports, it can be seen that the performance of the giants is still very stable. Specifically, what is the performance of Baidu's financial report core data?

The financial report shows that Baidu achieved 28.2 billion yuan in revenue in the third quarter; Baidu’s net profit reached 13.7 billion yuan, and a net loss of 6.4 billion yuan in the same period last year; from Baidu Judging from the quarterly earnings reports released this year, revenue has shown a U-shaped upward trend.

From the perspective of specific business segments, Baidu’s core business achieved revenue of 21.4 billion yuan. Among them, Baidu's core online advertising revenue was 18.4 billion yuan; Baidu's core non-online advertising revenue was 2.9 billion yuan, a year-on-year increase of 14%. Behind the growth of core business revenue, Baidu's active user growth has played a significant role. In September, the number of daily active users of the Baidu App reached 206 million; the number of monthly active users of the smart applet in the Baidu App reached 355 million, a year-on-year increase of 22%.

Based on the current momentum of Baidu’s performance growth, many investors are also optimistic about its performance next year. According to industry forecasts, Baidu’s e-commerce live broadcast can reach 20 billion yuan in revenue in the next year; Baidu’s core business resumes growth, and at a growth rate of 25%, next year’s revenue can reach 100 billion yuan; Baidu’s AI business is based on current The growth rate will reach 30 billion next year; overall, Baidu’s revenue will reach 150 billion next year, further accelerating growth.

From a data perspective, Baidu’s performance turning point has been further confirmed. What is the driving force behind Baidu’s performance improvement?

Business resilience is stronger than the market imagined. What is the turning point in Baidu’s performance?

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Although Baidu’s advertising business was also affected by the epidemic in the first quarter, based on the Q2 and Q3 financial reports, advertising business revenue has resumed rapid growth. This shows that the resilience of Baidu's core business is better than expected. Behind the turning point in performance, Baidu's financial report may be able to see the whole picture.

1. Mobile ecological accumulation variables continue to exert strength

After the quarter, the domestic advertising market has recovered to accelerate, especially the recovery of offline advertising is an obvious signal. After being affected by the epidemic, Focus Media went from 1.827 billion in Q1 to 2.617 billion in Q2, and reached 3.237 billion in Q3. This has gradually improved from the previous quarter. Focus Media’s performance has improved. This is fundamental to the Internet giant’s advertising business as its core revenue. Certainly support.

Previously, user consumption shifted to online due to the catalysis of the epidemic, which also promoted the acceleration of the digitalization of marketing, and typical industries increased their online advertising.

Among them, BAT is still in the leading position in terms of user-scale penetration rate. The differentiation is reflected in the industry distribution: mobile games in WeChat applets are more prominent; Alipay’s payment and consumption scenarios are superimposed, providing traffic access for a large number of service-type applets; Baidu’s search and information flow advantages are many video content-type small programs The program provides accurate recommendation support.

From this perspective, BAT attracts advertisers with their own characteristics. In the first three quarters of this year, Baidu's core business revenues were 15.3 billion yuan, 18.9 billion yuan, and 21.4 billion yuan, respectively, which increased significantly from the previous quarter. Behind the strong growth in core business revenue, perhaps it can be attributed to Baidu's improved mobile ecology that has enabled faster growth of in-end search and stronger monetization capabilities.

From the perspective of user data, both daily active and smart applet monthly active users are realized Good year-on-year growth. Behind the growth of this core data indicator, the closed loop of Baidu's content ecology has been established. In September, the number of Baijiahao content creators reached 3.6 million, a year-on-year increase of 52%; in the smart mini program, more and more popular applications such as e-commerce, travel, express delivery, and e-government were connected to Baidu to provide users with rich Service experience.

As ​​Internet giants focus on grabbing user time, in the field of mobile ecology, Baidu has upgraded content and services to integration, forming a search Social interaction, then to the unique closed-loop service ecology of transaction consumption. Relying on content and services to keep more users on Baidu APP will also provide momentum for Baidu's core business growth.

Two, diversified layout works, non-online advertising revenue growth is strong

Diversification has become the label of many Internet giants, and diversified revenue structure also helps giants share certain risks. In recent years, Baidu has also diversified its layout, and the strategy is also working from the perspective of financial reports. Among them, the proportion of advertising revenue has dropped from 94% in the first quarter of 2016 to 63% in the third quarter of 2020. As the proportion of advertising business revenue decreases, this means that the proportion of revenue contributed by Baidu's other businesses is increasing.

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In the quarter, Baidu’s core non-online advertising revenue increased by 14% year-on-year. Among them, the revenue from live broadcast delivery, streaming media advertising, and Baidu’s acquisition of YY to expand the live broadcast field Diversified pattern. In the third quarter, the number of live broadcasts of Baidu's knowledge products increased by 7 times from the previous quarter. In Double 11, Baidu's main live broadcast of good things also received good response, such as the hot-selling live broadcast of the new iPhone 12 series, which attracted over 2.74 million viewers to watch online.

Based on insights into user needs, Baidu continues to strengthen its pan-knowledge supply capabilities in key categories such as delivery, education, emotion, food, and health, which has also transformed The users on the Baidu APP realized the commercialization of live broadcast and membership payment.

In order to further explore the value of the live broadcast field, Baidu also announced the acquisition of YY Live broadcast for approximately US$3.6 billion on the day of the financial report. After the acquisition of YY, the follow-up will have multiple values ​​for Baidu. The first acquisition of YY will help Baidu deepen and consolidate its search foundation. The second is to better optimize the revenue structure. The revenue model behind Baidu may form a two-legged model of live search. At the same time, Baidu's revenue will enter the stage of refined operation, which will help it dig out more revenue points.

3. Borrowing new infrastructure from Dongfeng Baidu AI business prospects become clear

In the areas of autonomous driving and artificial intelligence, Google, Baidu, and Alibaba have their own layouts. To achieve greater breakthroughs in these two areas, it is inseparable from the great efforts of the giants for many years. As the first domestic Internet company to deploy artificial intelligence, Baidu's technical strength and status in the AI ​​field are beyond doubt. After years of continuous investment, Baidu's commercialization in the field of AI and autonomous driving has seen the dawn.

After the release of the financial report, Baidu’s CFO Yu Zhengjun revealed in a conference call: In the third quarter, AI’s new business achieved double-digit steady growth, and it is expected that the contribution will be even greater next year. Big. Behind the growth of cloud business, Baidu's leading AI technology has shaped its unique differentiated competitiveness. Baidu Smart Cloud, with leading AI technology and experience in smart finance, smart manufacturing, smart cities, smart energy and other fields, opens up more room for Baidu's AI commercialization.

At the front-end business level of the layout, the relevant data disclosed in this quarter’s financial report for autonomous driving and Xiaodu’s intelligent assistant is also worthy of recognition. In August, Apollo won the bid for the “New Infrastructure" project in Guangzhou Development Zone, Huangpu District, Guangzhou. The project amount was close to 460 million yuan, which may become the largest bidding project order in the field of intelligent transportation in China this year. In addition, Apollo's intelligent transportation solution ACE transportation engine has landed in nearly 20 cities including Beijing, Changsha, and Cangzhou.

Xiaodu is an important carrier of Baidu’s software and hardware integration strategy, and smart device shipments continue to lead the industry. According to data from IDC, Strategy Analytics and Canalys third-party organizations, Xiaodu smart screen shipments continued to rank first in the world in the second quarter, and Xiaodu smart speakers continued to rank first in China. As the largest conversational artificial intelligence operating system in the Chinese market, Xiaodu Assistant ranks first in the country in home, hotel/real estate, car and portable scenarios.

After continuously breaking the circle in crowds and scenes, we continue to expand market share and application scenarios , Xiaodu is recognized by the capital market in terms of technology, business strength and future potential.

Before the release of the earnings report, according to Jim Cramer, a well-known CNBC financial commentator, Alibaba is not the only Chinese company that investors should consider. I am also optimistic about Baidu and JD. . Obtaining well-known analysts and overseas institutions are optimistic about Baidu's core business revenue capabilities. What kind of upside do they see from Baidu's stock market?

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Behind the increase of overseas institutions, Baidu has launched a value revaluation battle

After years of underestimation, the capital market’s attitude towards Baidu will change in 2020. Many overseas investment institutions have already responded. In the third quarter of this year, many well-known foreign institutions such as Templeton Asset Management Ltd increased their holdings of Baidu stock. Credit Suisse, Barclays, Goldman Sachs and other institutions have upgraded Baidu's rating and target price. Behind the change in Baidu's attitude, perhaps the market changes and Baidu itself are inseparable.

First, Chinese concept stocks have been listed in Hong Kong one after another, and Baidu is rumored to be returning to Hong Kong stocks. This will help Baidu's valuation revaluation. Hong Kong stocks will support the US stocks. . On the one hand, the successful return to Hong Kong of companies such as Alibaba, JD.com, and NetEase provided Baidu with a mature model. On the other hand, Baidu's listing in Hong Kong will not only help reasonable pricing, but at the same time, the secondary listing can broaden financing channels and strengthen its layout in mobile ecology and AI.

Second, Internet giants have split their businesses and listed, and Ali Ant Group is currently only temporarily deferring its listing JD.com’s JD Digits and JD Health already have plans to go public; Baidu’s online disk and Xiaodu are expected to split and go public. Behind the Internet giant's splitting of sub-business listings, this can also increase the valuation of the parent company to a certain extent.

Previously, the media reported that Baidu Netdisk will complete the spin-off and listing on the A-share sci-tech innovation board, which can be compared to the US stock cloud storage service provider Dropbox with a current market value of $7.731 billion . Dropbox uses a free payment model. The company has stated that only 11 million of its 500 million registered users pay for its products. In 2019, the number of paying users of Baidu's mobile products exceeded 50 million. The main products include Baidu Netdisk. From this perspective, the future valuation value of Baidu Netdisk will not be lower than that of Dropbox.

Third, according to Baidu’s diversified business form, several core businesses in the future will have better valuation values, which will give the outside world a new Examine the direction of Baidu's valuation. From the perspective of mature and stable mobile ecological business, Baidu is currently on the premise of steady growth in its existing advertising business revenue. After the acquisition of YY, it is expected to achieve both advertising and live broadcast revenue growth. This will undoubtedly enlarge Baidu’s operating Imagination space at the collection level.

Secondly, in the fast-developing cloud business, the valuation of Internet giants in this business is not low. In the Goldman Sachs report, Alibaba Cloud is valued at US$93 billion; Tencent Cloud should be roughly valued at around 45 billion yuan; Baidu Smart Cloud’s business quality is better than Jinshan Cloud, with Jinshan Cloud’s revenue of around 4 billion yuan and a market value of 5 billion US dollars. The market value of Baidu Cloud's cloud computing business should be around 10 billion U.S. dollars, estimated by 7 billion yuan and given an appropriate premium.

With the advent of 5G and the increase in online business in the post-epidemic era, the demand for cloud computing services will definitely increase, which will also drive Baidu’s cloud business Valuation potential.

In the highly anticipated field of autonomous driving, Baidu’s smart driving business valuation refers to Waymo. Waymo’s last round of financing 30 billion, even with a 50% discount, Apollo There is also a valuation of 15 billion. In addition, the Xiaodu strategic form of Baidu's spin-off is a typical ecological thinking. More hardware sales, better intelligent data training, and broader and diversified service extensions will form an intelligent breakthrough from quantitative change to qualitative change. Once Xiaodu successfully goes public in China, through financial consolidation, Baidu's own market value growth will surely be boosted.

Conclusion

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Previously, it was difficult to provide Baidu with the underlying technology due to the capital market Valuation with ability is also an important reason for its underestimation. However, as Baidu is expected to go public in Hong Kong, the successful return of Alibaba, JD.com, NetEase and other companies to Hong Kong has provided Baidu with a mature model, and Baidu is also expected to have a better valuation in Hong Kong stocks. At the same time, if Xiaodu plans to go public after splitting the financing from Netdisk, and the commercialization of Baidu Apollo, these will greatly increase Baidu's market value.

Source of this article: US Stocks Research Agency (Public Account: Meigushe) aims to help Chinese investors understand the world, focusing on reporting on US technology stocks and Chinese stocks, friends who are interested in US stocks, hurry up and follow us

Tags: Baidu

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