Baidu (BIDU) Stock: Will The Buyback Revive Positive Price Movement?

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Baidu.com, Inc. (NASDAQ: BIDU)

Baidu recently released their earnings report. After missing earnings expectations, the stock declined dramatically. However, the company had a secret weapon up its sleeve; and that weapon was announced on Friday. BIDU will be buying back a massive amount of common stock. Today, we’ll talk about what we saw from earnings, the amount of stock the company is buying back, why this should increase the value of the stock, and what we can expect to see moving forward. So, let’s get right to it…

Baidu Misses Earnings Expectations

As mentioned above, Baidu recently released their earnings report; and unfortunately, the company didn’t do quite as well as investors were expecting to see. Here’s what was reported…

Top-Line Revenue – For the second quarter, Baidu reported top-line revenue in the amount of $2.67 billion. This proved to be a year over year increase of 38.5%.

Earnings Per Share – Unfortunately, earnings fell short of expectations. For the second quarter, analysts expected Baidu to report earnings of $1.80 per share. Unfortunately, the company was only able to produce $1.67.

While revenue growth was solid, earnings per share was a big miss; leading to a decline in the value of the stock.

What We Saw In The Market

Any time earnings fall short of expectations, we tend to see poor activity in the market as a result. That’s exactly what we saw from Baidu. On the day of the earnings release, the company’s stock fell from $197.68 per share to $168.03 per share.

Baidu Announced Its Secret Weapon

While BIDU definitely felt the pain following earnings; the company has seen slow and steady growth from the $168.03 per share price it fell to. However, Baidu had a secret weapon up its sleeve that it announced on Friday. The company will be buying back $1 billion in common stock. While $1 billion only represents about 2% of the company’s market capitalization, it is a big move that shows investors that the company has faith in further growth in the future.

What We Can Expect To See Moving Forward

Moving forward, I’m expecting to see positive news in both the short and long term outlook. Here’s how I see it…

  • Short Term – In the short term, investors are likely to be excited about the $1 billion buy back the company has planned. As a result, we should see rising demand for the stock; which will likely lead to a rise in value.
  • Long Term – While Baidu earnings weren’t quite what investors expected to see, I don’t think that we’re looking at a company that’s likely to struggle in the long run. All in all, the company proved solid growth in monthly active users as well as revenue. This will likely lead to growth in the long run.

What Do You Think?

Where is Baidu headed and why? Let us know your opinion in the comments below!

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