Baidu is expected to keep treading downward with some analysts recommending that the Chinese search engine giant's stocks should be sold. The Sell label emerged as it was revealed that the company's management is still struggling with new ideas to reawaken its core business.
Baidu has been dominating China's search engine realm over the last few years but it also continues to struggle in terms of developing new ideas that could attract users towards its core business, its online advertisement arm through local searches.
According to Seeking Alpha, the company's administrative body is "panicking" amid queries regarding solid plans to revamp its advertising arm. Some industry experts argued that Baidu's management appears to have no clear action plan going forward.
The company released its quarterly earnings report last week. The results disappointed many analysts and investors as it depicted significantly low earnings per share estimates. Costs also soared and margins dropped by seven percent.
The firm's revenue growth of 15 percent was overshadowed by overhead costs that reached almost 100 percent, not to mention the company's slower growth over the last five years.
With revenue growth of 32 percent, 27 percent, and 22 percent in the last three quarters, analysts said the figures indicate increased spending and a decline in growth compared to other Chinese rivals.
Investors and analysts are now urging Baidu to address long-term problems for now instead of compromising its margins through continued spending. Its recent buyback move also gained criticism from experts who believe it should focus on investing in new businesses.
A few hours after the company released its first quarter 2019 results, the company's stocks dropped dramatically by over 10 percent, further disappointing the market. Consumers moving to mobile searches played a major role in the decline of Baidu's performance.
Most stock analysts believe Baidu's slower growth figures were affected by the slowing economy in China as well as ongoing global trade disputes. On the other hand, bullish analysts are hopeful of the future investments that the company has been pouring its assets on.
Over the last few years, Baidu has been investing heavily on advanced technology such as artificial intelligence (AI) and cloud computing. It has also been pumping work on subsidiary iQiyi to provide improved video streaming services for consumers.
Some architectural experts have also commended Baidu Maps, with its 3D cityscape features and precise location tracking. The mapping app has since gained the attention of consumers in China who love using trackers and location hunting activities.
As for its AI initiatives, the company is reportedly planning to spin off Apollo, its autonomous driving platform. A spokeswoman has since denied the claims but some analysts believe it is not impossible for Baidu to seek the assistance of investors.
