Posted 3/5/2024, 11:33:11 AM
Baidu Beats Earnings Expectations, Sees Rebound in Advertising and Growth in AI
- Baidu reported better than expected Q4 earnings, with double-digit growth in operating income and free cash flow
- The company is seeing recovery in its digital advertising business and benefiting from AI products like its Ernie chatbot
- Baidu has strong free cash flow margins of 20% in Q4 and 19% for full-year 2023, up from prior years
- The stock trades at a 45% discount to historical valuation based on price/free cash flow ratio
- Biggest risk is if Baidu falls behind in AI capabilities and its core search platform becomes less valuable