Baidu.com Posts 87% Profit Gain, Shares Surge
Baidu.com, China's top search engine, said on Wednesday its quarterly profit rose 87 percent and forecast another surge in revenue, boosted by Internet traffic growth from the Beijing Olympics.
Baidu shares rose 13 percent in after-hours trading.
Beijing-based Baidu posted a second-quarter profit of 265 million yuan ($38.6 million) for the three months ended June 30, compared with 141.9 million yuan a year earlier.
The result beat the average expectation for net profit of $35.5 million, according to eight analysts polled by Reuters Estimates.
"We expected a strong June quarter and it definitely delivered," said Colin Gillis, Internet equity research analyst at Canaccord Adams, who has a "sell" rating on Baidu.
Baidu's stock, which has has risen almost 31 percent in the quarter, closed down 1.25 percent at $288.70 on Wednesday before the results were announced. In extended trading, Baidu shares rose to $327.25.
Revenue doubled to 802.6 million yuan (US$117 million) in the quarter, compared with 401.3 million yuan a year earlier.
The company forecast revenue in the current quarter in a range between $905 million yuan ($132 million) and $935 million yuan ($136 million), representing a rise of between 82 percent to 88 percent from a year earlier.
Analysts, on average, are forecasting third-quarter revenue of $135.76 million, according to Reuters.
"This (third-quarter forecast) reflects our anticipation of temporarily altered user behavior during the Beijing Summer Olympic Games," Baidu said in a news release. "We believe the event will have long term beneficial effect on the Internet industry as more and more people will appreciate the Internet as an effective tool to find information."
While Baidu is not a direct beneficiary of the Olympics, it will benefit from higher Internet usage during and after the event and is likely to double its revenue this year, CLSA analyst Elinor Leung wrote in a research note.
"Our concern is that growth rates may be slowing down, particularly as China catches a cold in the post-Olympic hangover," said Gillis, who has a $265 price target on Baidu shares.
Baidu dominated China's Web search market in the second quarter, with market share of nearly 63 percent, according to data firm iResearch. Google had 26 percent and Yahoo China was third with nearly 8 percent of the 1.3 billion yuan ($190.6 million) market, it said.
Growth in China's Internet market will slow until 2010, but still keep growing at more than 30 percent annually. It is expected to hit 137.5 billion yuan in 2010, with 600 million Web users, according to research firm Analysys International.