Investing

Earnings Previews: Baidu, iQiyi, Palantir

Paul Ausick

Published: August 10, 2021 1:34 pm

Of a dozen firms that reported earnings before markets opened on Tuesday, eight beat estimates and four missed. That is a significantly higher percentage of misses than we have seen.

We already have posted our previews of four stocks reporting results after markets close Tuesday or before the opening bell on Wednesday: Coinbase, FuboTV, Unity Software and Berkeley Lights. We also have previewed five companies scheduled to report earnings after markets close Wednesday: Clover Health, eBay, Lordstown Motors, Nio and Opendoor.
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Here’s a preview of three companies scheduled to release results first thing Thursday morning.

Baidu

Beijing-based Baidu Inc. (NASDAQ: BIDU) is China’s premier search engine. Its share price reached a 52-week peak in mid-February and has tumbled more than 50% since then. Depending on one’s point of view, this is either a fall that is going to continue or an opportunity to buy the dip. Baidu’s net cash total at the end of the first quarter exceeded its market cap. That seems like an opportunity.

One investor who chose to sell was Cathie Wood’s ARK Autonomous Technology & Robotics ETF. The fund has sold nearly 4.5 million shares in Baidu and currently owns about 473,000, valued at $78.8 million.

Of 36 brokerages covering the stock, 30 have a Buy or Strong Buy rating on the shares, and five more rate the stock a Hold. At a recent price of around $165.50, the stock’s upside potential based on a median price target of $307.65 is about 86%. At a high price target of $394.45, the upside potential is 138%.

Analysts expect Baidu to post second-quarter revenue of $4.78 billion, a sequential increase of 11.4% and a 30% jump year over year. Adjusted earnings per share (EPS) are forecast at $2.06, up 9.2% sequentially but down two cents year over year. For the full year, the consensus estimate calls for EPS of $9.37, down 4.3% year over year, and revenue of $19.72 billion, up 20%.

Shares trade at 18.4 times expected 2021 EPS, 15.3 times estimated 2022 earnings and 12.6 times estimated 2023 earnings. The stock’s 52-week range is $115.59 to $354.82. Baidu does not pay a dividend.

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iQiyi

Another Beijing-based internet firm, iQiyi Inc. (NASDAQ: IQ), trades down more than 50% over the past 12 months. For the year to date, the stock is down 63%, including a plunge of 42% in late March as banks ensnared in the Archegos collapse dumped their shares in the internet content and gaming company that is a subsidiary of Baidu. Unfortunately for the company, a blizzard of announced new projects and partnerships has done nothing to stop the sliding stock price.

Analysts, however, have not given up on the company. Of 20 brokerages surveyed, nine have a Buy or Strong Buy rating and 10 rate the stock a Hold. At a price of around $10.75, the upside potential to the median price target of $17.83 is almost 66%. At the high target of $26.83, upside potential is nearly 150%.
Second-quarter revenue is forecast to drop by about 5.5% sequentially to $1.15 billion. That’s 9.5% higher than second-quarter 2020 revenue. iQiyi is expected to post an adjusted loss per share of $0.28, three cents worse sequentially, and flat year over year. For the full fiscal year, analysts expect a loss per share of $1.09 on an 8.8% increase in revenue to $4.95 billion.

iQiyi is not expected to return a profit in 2021, 2022 or 2023. The stock currently trades at 1.9 times its enterprise value-to-sales (EV/S) ratio. That ratio is estimated at 1.7 in 2022 and 1.5 in 2023. The stock’s 52-week trading range is $10.33 to $28.97, and the company does not pay a dividend.
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Palantir

Intelligence software maker Palantir Technologies Inc. (NYSE: PLTR) has posted a share price increase of about 144% since its October 2020 IPO. Since peaking in late January, thanks to the meme stock run-up, shares trade down more than 40%. They dropped more than 12% in July, more than competitor Verint and sharply more than share price gains at both Splunk and Cognizant.

Cathie Wood’s ARK Innovation ETF and ARK Next Generation Internet ETF hold a combined total of about 26.7 million shares of Palantir stock, valued at around $611.7 million.

Just nine brokerages cover the stock, and only one has a Buy rating on it, while another five rate the stock a Hold. At a price of around $23.50, the shares have outrun their median price target of $20. At the high price target of $28, the upside potential is about 19%.

Analysts expect Palantir to report second-quarter revenue of $361.1 million, up 5.8% sequentially. EPS are forecast to come in at $0.03, down a penny sequentially. For the full year, EPS are expected to total $0.15, down nearly 22% year over year. Revenue is expected to rise 35.6% to $1.48 billion.

Shares trade at 151.0 times expected 2021 EPS, 105.3 times estimated 2022 earnings and 77.9 times estimated 2023 earnings. The stock’s 52-week range is $8.90 to $45.00. Palantir does not pay a dividend.

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