Baidu Baidu Baidu

Baidu disappoints on guidance and Coupang widens losses

Equities 5 minutes to read
PG
Peter Garnry

Head of Equity Strategy

Summary:  Baidu is surprising the market with a weaker than estimated Q3 revenue guidance which is both large reflecting increased uncertainty over short-term growth opportunities in China but also the possibility of a negative Q3 revenue growth q/q which would be the first time since 2016. Coupang is seeing healthy 71% revenue growth in Q2 but operating losses are widening due to investments in expanding the business to Japan and Singapore on top of losses related to a fire at one of its largest fulfillment centers in South Korea.


Earlier this week SoftBank Group, one of the largest technology investors in the world, reported a large hit to profits driven due to lower share price of its investment in Coupang, called the “Amazon of South Korea”. Coupang is indicated down in US pre-market at around $33.90 which is below the IPO price at $35 and thus down 51% from its all-time high reached on its first day of trading. For a good rundown of Coupang we can highly recommend this analysis from TechCrunch back in March. Key to Coupang’s success has been its massive logistics operations and its ability to get new customers to steadily increase their spending on its e-commerce platform in the years following being a new customer.

Source: Saxo Group

Coupang reported last night after the US market close Q2 revenue of $4.48bn vs est. $4.46bn up 71% from a year ago, but adjusted EPS was $-0.30 vs est. $-0.15 surprising investors. The increased losses were driven by massive investments fueling its expansion domestically and abroad (Japan and Singapore are the two first markets outside South Korea) and fire damaging one of its largest fulfillment centers in South Korea. Weighing on its shares is the increasing competition from Naver, another South Korean e-commerce company, and a recent investigation into its business practices of prioritizing its own products over suppliers (similar investigation that is under way against Amazon in both the US and Europe). Sell-side analysts covering the stock remains positive with a price target of $44.70.

Baidu hints of economic slowdown and uncertainty

Baidu reports Q2 revenue of CNY 31.4bn up 20% y/y while EPS are down 12% y/y driven by increased costs due to investments in future growth areas and mark-to-market losses on its long-term investment in Kuaishou Technology. But investors are sending Baidu shares lower in pre-market trading due to its Q3 revenue guidance of CNY3 30.6-33.5bn vs est. CNY 33.1bn. The revenue guidance leaves room for a q/q decline in Q3 which seasonally is a strong quarter and negative q/q revenue growth between Q2 and Q3 has not happen since 2016 when Baidu experienced a minor revenue decline between the two quarters of that year. The wide range in its revenue guidance also shows that the slowdown in the Chinese economy and uncertainty over delta outbreaks in the country could stall core advertising revenue. The slowdown in revenue growth comes at a time when the Chinese technology sector is experiencing increased uncertainty over technology regulation by the government. Read our recent research notes (see below) for more insights into this topic:

Source: Saxo Group
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.