Baidu Stock in Freefall After Q1 Losses Shock Investors
As China’s economic growth continues to slide, one of its largest tech companies, Baidu, has taken a hit to advertising revenues. It reported losses of $47 million for the first quarter of 2019, with online advertising demand plunging.
CEO Robin Li blames his company’s woes on the slowing pace of China’s economic growth as well as tighter government oversight of the internet. China remains one of the most censored countries in the world. Li told investors during an earnings call:
“Although the Chinese government has announced many economic policies to bolster the economy … We are taking a cautious view that online marketing in the near term will face a more challenging environment.”
Trade Tensions To Blame?
China’s economy is now growing at its slowest pace in almost 30 years, albeit on the back of year-on-year double-digit GDP growth during the first decade of the century. Baidu relies heavily on the health of the domestic economy.
The country is now plagued by mounting uncertainty as it finds itself in the midst of escalating trade tensions with the United States. The two countries have been threatening to increase tariffs, with Walmart recently announcing plans to increases retail prices as a result of higher wholesale costs.
Two affiliates of Chinese mobile phone giant Huawei were slapped with indictments alleging ten federal crimes, including fraud and conspiracy in connection with deals in Iran.
The case has further strained relations between the two economic powerhouses. Apple stock could face a beating due to mounting trade tensions between the two countries. The consumer electronics giant could be severely lashed by a Sino-US trade war, with the Chinese market its second most important.
While Baidu is not exposed to the US marketplace, any strain placed on China by trade tensions could impact the company negatively, especially as the domestic Chinese economy continues to struggle.
Baidu On The Mat As Tencent And Alibaba Reign
Baidu might be suffering from wider Chinese malaise, but rival tech giants Tencent and Alibaba both released positive figures for the quarter earlier in the week, suggesting Baidu may be facing problems relating to its corporate strategy.
With a reliance on internet marketing revenue, which made up 73 percent of its earnings for the last quarter, Baidu said it would merge its mobile and search businesses into one. The firm also announced several executive changes.
BIDU shares last traded at $128.88 for a session decline of 16.15 percent, far and away the worst among Nasdaq-listed stocks.
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