Why Did These Results Hurt Baidu’s Stock Price?

The Chinese search engine Baidu (NASDAQ:BIDU) beat analysts’ expectations with a 36 percent gain in fourth-quarter profit, but that was not enough. The increase was its slowest growth since 2009 and the company disappointed investors with a soft guidance for 2013; following the release of the earnings report, shares began a downward spiral. In after hours, just after 6 p.m. Eastern Standard Time, the stock was trading down 5.32 percent at $101.50.

It was just as analysts feared; Maxim Group predicted in a research note seen by Barron’s that the company will likely meet its quarterly guidance, but its margins and profitability would be hurt in the future. The firm lowered its price target to $80 per share as a result of its concerns for the upcoming year.

Baidu reported that revenue rose 41.6 percent year-over-year to $1.017 billion, above what both Wall Street and the company itself had estimated. For the three-month, Baidu posted a net income of 448.7 million, or $1.28 per share. However, for the next quarter, the company predicted revenue of between $945.4 million to $975.9 million, a decrease from the search provider’s most recently reported results. Analysts polled by Thomson Reuters were expecting a forecast for revenue of $964 million, a figure which falls between the company’s range.