American depositary receipts of Baidu Inc., owner of China’s dominant Internet search engine, tumbled 11 percent in after-market trading Tuesday in New York after the company forecast second-quarter sales growth below analysts’ estimates.
ADRs of the Beijing-based company slid to $122.75 by 4:45 p.m. in New York, after slumping 2.7 percent to $135.83 during normal trading hours, data compiled by Bloomberg show.
Revenue is expected to rise to between 5.34 billion yuan ($847 million) and 5.46 billion yuan in the second quarter, Baidu said in a statement Tuesday after the 4 p.m. close. That compares with a 5.48 billion yuan average of analysts’ estimates compiled by Bloomberg.
Net income in the first quarter climbed to 1.88 billion yuan, or an adjusted 5.48 yuan per ADR, from 1.07 billion yuan a year earlier, according to the statement. Profit matched the 1.88 billion yuan average of 10 analysts’ estimates collated by Bloomberg. Revenue rose 75 percent to 4.26 billion yuan.
Baidu boosted sales of search-engine keywords by adding Web users and targeting bigger advertisers, which are spending more online as China’s economic growth slows. Chief Executive Officer Robin Li is expanding the company’s services for smartphone users to counter Internet rivals including Tencent Holdings Ltd., after overcoming competition from Google Inc.
“Spending by larger customers have been driving Baidu’s results,” Kelvin Ho, who rates Baidu a buy at Yuanta Securities in Hong Kong, said before the earnings release. “In the long term, Baidu’s market position is still very good.”
Baidu Trailing Tencent
Baidu stock has gained 17 percent in New York this year, compared with the 53 percent gain in Hong Kong-traded shares of Tencent, China’s biggest online-games company, and the 9.3 percent advance in Sina Corp., operator of the Twitter-like Weibo microblogging service.
Baidu accounted for 78.5 percent of China’s search-engine market by revenue last quarter, compared with 16.6 percent for Google, according to research company Analysys International.
Google has been losing ground in China’s search-engine market since January 2010, when the Mountain View, California- based company said it was no longer willing to comply with Chinese regulation to self-censor Web content. Two months later, the U.S. company shut its Google.cn service and redirected Chinese users to its site in Hong Kong.
Large advertisers that make up less than 1 percent of Baidu’s customer base are contributing as much as 20 percent of the company’s revenue, according to an April 20 Morgan Stanley report. Improved keyword matching technology in Baidu’s Phoenix Nest advertising system helped boost sales to bigger clients, according to the U.S. bank.
Online advertising sales in China may increase 39 percent this year, outpacing the 4.6 percent growth in ad sales for newspapers, and 11 percent for television, according to a report this month by Nomura Holdings Inc.
Tencent plans to offer “performance-based” advertising services this year, and seeks to increase sales from its search- engine, President Martin Lau said last month.
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