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IQiyi Up, Baidu Down - Opposing Directions the Day After Earnings

IQiyi closed today at $27.70, up $4.94 per share. Baidu, which traded down as much as 4.5 percent today, ended at $167.17 per share, off $4.64.

Peter H. Frank
    Feb 22, 2019 1:25 PM  PT
IQiyi Up, Baidu Down - Opposing Directions the Day After Earnings

Shares in iQiyi Inc. (Nasdaq: IQ), a leading online entertainment service in China, soared nearly 22 percent today as investors responded to its report late yesterday that fourth-quarter revenue jumped 55 percent year-over-year to hit the $1 billion mark. 

At the same time, however, search engine giant Baidu Inc. (Nasdaq: BIDU), which holds a controlling stake in iQiyi, moved in the opposite direction, losing nearly 3 percent on the day. The company, which saw its shares jump in after-hours trading late yesterday after announcing its earnings, was the subject of a negative "Heard on the Street" column today in The Wall Street Journal. 

IQiyi closed today at $27.70, up $4.94 per share. Baidu, which traded down as much as 4.5 percent today, ended at $167.17 per share, off $4.64.

With the results of Baidu so closely linked to iQiyi, the two companies routinely announce earnings on the same day with Baidu's consolidated results highly driven by results at iQiyi. 

For the three months ended Dec. 31, iQiyi said Thursday its revenue of $1 billion compared with $700.7 million in the year-earlier period. 

The net loss attributable to the company was $505.7 million, or 70 cents per American depositary share, compared with a loss of $89.1 million a year before. No per share comparison was provided as iQiyi went public in New York last March, raising $2.25 billion at $18 per ADS. 

Accounting for much of the lower results, the company said the cost of revenue doubled during the quarter to $1.2 billion, primarily because of higher content costs as iQiyi continues to build its content library. At the same time, revenue from content distribution rose 124 percent, the company said, to $522 million while membership services revenue increased 66 percent. 

At Baidu, which was built primarily on its now-slowing search business, revenue reached $3.96 billion during the last three months of 2018. That represented an increase of 22 percent from the same period the prior year. 

However, the company reported net income during the fourth quarter dropped 50 percent year-over-year to $303 million, or 86 cents per share.  

Although Baidu's stock jumped more than 4 percent in after-hours trading yesterday, in its report today, The Wall Street Journal concluded: "With investors expecting so little – Baidu trades at 17 times forward earnings, close to a 10-year low – the fast growth in noncore businesses may generate some short-term excitement. . . . But in the long run, investors may want to know who's paying the bill for all that growth." 

The company also said it expected in the current quarter to record its slowest revenue growth in two years.

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