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Baidu (BIDU) Q4 Earnings to Benefit from Solid iQIYI Momentum

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Baidu, Inc. BIDU fourth-quarter 2019 results, which are scheduled to be released on Feb 27, are likely to have benefited from solid momentum across its iQIYI segment.

With the acquisition of iQIYI, the company started offering online entertainment services. Further, it integrated the online video business of PPStream into iQIYI segment.

Moreover, Baidu has been gaining solid momentum in the China’s online video streaming market on the back of well-performing iQIYI.

Additionally, we note that the segment has become an integral division of Baidu as it has been driving the company’s membership services and online marketing revenues.

In the last reported quarter, iQIYI segment generated RMB 7.4 billion revenues, up 7% year over year that was driven by solid membership growth. Further, its subscriber base stood at 105.8 million in the third quarter, reflecting year-over-year growth of 31%.

We believe the trend is likely to have continued in the to-be-reported quarter on the back of iQIYI’s self-producing long-form videos series and Baidu's search plus feed ecosystem.

Click here to know how the company’s overall fourth-quarter performance is likely to be.

Factors at Play

iQIYI’s strength across its content portfolio and interactive ads is likely to get reflected in the fourth-quarter performance.

Further, strengthening demand for the company-produced drama series, original movies and variety shows are expected to have benefited the segment’s fourth-quarter performance.

Further, the company’s next-generation Content Delivery Network, CDN system Qisubo, received the China Computer Federation Science and Technology Award for Outstanding Technology Advances at 2019 China National Computer Congress during the quarter under review.

This is also expected to get reflected in the segment’s fourth-quarter results.

Additionally, iQIYI’s content slate during the to-be-reported quarter included Sword Dynasty, The Great Master, Fearless, FOURTRY and Qing Yu Nian.

Apart from these, the company also successfully launched Hot-Blooded Youth and flagship Qipa Talk Season 6 in the to-be-reported quarter.

All these endeavors are expected to have benefited the segment, which in turn is likely to have driven the fourth-quarter performance.

Zacks Rank & Stocks to Consider

Currently, Baidu carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Inphi Corporation IPHI, Microchip Technology Incorporated MCHP and Model N, Inc. (MODN - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Inphi, Microchip and Model N is currently pegged at 38.74%, 13.28% and 13%, respectively.

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