Brief TMT & Internet: Baidu (BIDU): Stagnant in 4Q18, Wrong Change Feeds a 24% User Increase to Google and more

In this briefing:

1. Baidu (BIDU): Stagnant in 4Q18, Wrong Change Feeds a 24% User Increase to Google
2. IQiyi (IQ): In 4Q18, Baidu’s Growth Engine Lost Control Over Content Cost

1. Baidu (BIDU): Stagnant in 4Q18, Wrong Change Feeds a 24% User Increase to Google

• Baidu posted a weak result for 4Q2018.
• We believe it is a wrong decision to change Baidu into an in-house search engine.
• Alphabet Inc Cl C (GOOG US) ’s monthly active users in mainland China increased 24% QoQ in January 2019.
• We believe Baidu’s stock price has been fairly impacted.

2. IQiyi (IQ): In 4Q18, Baidu’s Growth Engine Lost Control Over Content Cost

• We notice that the growth rate of cost of revenues exceeded the growth rate of membership revenues.
• We believe that the margins will continue to decline even if the advertising business recovers.
• IQ has the largest monthly active users in the video market, but it does not have an obvious advantage over Tencent Holdings (700 HK) .