Were Baidu’s Earnings a Hit or Miss?

Volume is high and the markets are down on Wednesday as traders re-position themselves after a two-day break. Among the companies taking flak is Chinese search giant Baidu (NASDAQ:BIDU), which posted third-quarter 2012 earnings that attracted a mixed — but mostly negative — reaction.

Total revenue for the quarter was 6.251 billion yuan ($994.6 million), a 49.7 percent increase from the quarter in 2011. Operating profit was up 48.1 percent to 3.297 billion yuan ($524.6 million). Mobile search now accounts for 20 percent of overall traffic, growing 25 percent quarter over quarter, and 110 percent year over year. The company’s advertiser customer base grew 28 percent year over year, with revenue per customer increasing 17 percent for the same period.

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Piper Jaffray analyst Gene Munster remains positive because of these numbers, trimming his price target to just $193 from $200 with an “overweight” rating on the stock. Shares closed at $113.84 last Friday.

Citigroup was not so kind. Analysts cut their rating from a “Buy” straight to “Sell” and slashed their price target from $154.15 to $99.71. On Wednesday, the stock is down over 5 percent in early afternoon trading.

Baidu’s fourth-quarter guidance came in at a high of $1.01 billion, below a consensus of about $1.03 billion. Lower guidance compounded by a rapid shift to mobile — a trend that will likely result in lower ad revenue — are the major factors in Baidu’s selloff.

Other Chinese Internet stocks like Sina Corp. (NASDAQ:SINA), Sohu.com (NASDAQ:SOHU), and Renren (NYSE:RENN) are also down on Wednesday. Companies around the world are still trying to figure out mobile, but if China’s top player isn’t there yet, it’s a hard case to make for the lightweights.

Perpetual underdog Qihoo 360 (NYSE:QIHU) has avoided falling in sympathy with related stocks. The company is scheduled to report its third-quarter earnings at the end of November. The earnings will help paint the first clear picture of how the company is doing in its bid to topple Baidu.

One thing that was made abundantly clear in the Baidu earnings call was that mobile matters. The company’s leadership emphasized their plan to monetize mobile as quickly as possible, but were careful to include that it would take time.

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