Financial experts have encouraged interested Baidu investors to look into the search engine provider's earnings instead of focusing on the growth rate reports that have been emerging over the past weeks.
In a Tuesday report by Seeking Alpha, the financial service provider noted that Baidu's earnings despite criticism could be a turning point for the company. Analysts from the company added that potential investors should focus on the income statement from China's most dominant search engine provider.
While some investors keep their eyes on growth rate reports, SA analysts recommended that investments should also be based on a company's profit margins.
Baidu's shares dipped over the past years due to a couple of controversies that the tech giant was involved in. The latest was an article by journalist Fang Kecheng that has since gone viral and was shared by media outlets.
In the article, Fang said Baidu search results have been placing Baijiahao content on top while stories from other media outlets were given less priority. The Beijing-based company refuted these claims.
Many analysts have since dropped their Baidu ratings to either a "Hold" or a "Sell" stock rating. However, the SA report stressed the importance of making decisions based on other aspects instead of just growth rates and analyst stock ratings.
One of the factors that SA analysts recommend is gross margin. This is a vital metric that could tell whether Baidu is competitive or not. The company currently has a revenue margin of 50 percent and while this is a significantly lower margin compared to what the Chinese provider experienced in the past, other tech companies have lower figures.
Alibaba Group Holding Limited and Tencent Holdings Limited have recorded gross margins that are lower than 50 percent. Alphabet's Gooogle, on the other hand, only reached a 57 percent margin.
Baidu's gross profit numbers also increased by 46 percent over the past months and SA analysts said this is a good starting point for investors to look at. The figures are said to indicate the company's sustained competitive advantages over other groups.
As with other companies, growth may continue to slow down at some point. However, with Baidu's recent advancements in the technology sect, it was predicted that the search engine giant may grow its revenue in 2019.
During the weekend, Xinhua reported that Baidu is planning to build the second artificial intelligence (AI) cloud computing center in China. The facility will be constructed in the northern city of Baoding, Hebei Province.
Baidu continues to explore projects in AI tech as it introduced new AI boards and a source edge computing platform earlier this month. These advancements are expected to haul in more revenue for the Chinese provider.
