Baidu Dazzles, JD.com Fizzles in Latest Results

Leading search site Baidu.com Inc. was the clear leader in the latest quarter among China’s leading internet companies, emerging as a sharper and more-focused firm amid a broader boom that saw the top four players consolidate their sector-leading positions.

Meanwhile, No. 2 e-commerce firm JD.com Inc. was the biggest loser for the period as it swung back into the loss column after briefly posting a profit earlier this year. Despite that setback, the broader picture for that pair, alongside industry giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd., looked very strong, said Ryan Roberts, an analyst at boutique brokerage MCM Partners.

“This quarter’s results for Baidu, Alibaba, Tencent and JD.com were impressive. It was tough to see any signs of a ‘slowdown’ in China,” he said.

Investors were most bullish about Baidu, and they have bid up the company’s stock by 10% since its second-quarter results announcement late last month. The stock has risen 27% over the last month to a fresh two-year high. That has allowed the company to solidify its spot as China’s third-largest internet company after JD.com briefly threatened to take the position in late June on its own surge.

Baidu posted 14% revenue growth for the quarter, well behind rates it posted in past years. But that gain marked a steady improvement from two quarters of rare revenue contraction last year, following a scandal that rocked the company and forced it to overhaul its system for displaying online search results. Investors were also cheered by continued progress for Baidu’s iQiyi online video unit, which is creeping toward the break-even mark and an expected initial public offering.

“Baidu was the standout — its core search business is well on the path to recovery,” Roberts said. “It’s a refocused company, and is in the sweet spot to capitalize on artificial intelligence for consumer tech.”

JD.com made headlines in late June after it looked set to pass Baidu, but has retreated to become a solid No. 4 following an 11% skid this week. That tumble came after it announced it posted a massive loss of nearly 500 million yuan ($74.9 million) in the second quarter, double its loss from a year earlier and reversing a surprise first-ever net profit in this year’s first quarter.

In between that pair were Alibaba and Tencent, which have risen to the ranks of the world’s 10 largest publicly traded companies this year on major rallies for their shares. Both companies reported revenue and profit growth of 50% or higher, but failed to impress investors, who have become used to such heady numbers. Shares of Tencent are up just 1.1% since its results announcement, while Alibaba’s have done slightly better with a modest 2.8% rally.

At their current levels, both Alibaba and Tencent now trade at relatively rich price-to-earnings multiples of about 66, while Baidu’s trades at a lower but still-strong 48.

Contact reporter Yang Ge (geyang@caixin.com)