Alphabet Beats Baidu on Risk, Growth Potential and Valuation

Independent TMT Analyst

Edison Lee, CFA

Equity Bottom-Up

<ul>
<li>For 2Q16, <a href="https://www.smartkarma.com/entities/11369" target="_blank" data-smartkarma-citation="entities:11369:1">Alphabet Inc Cl C (GOOG US)</a>'s revenue and non-GAAP EPS beat consensus by 3.5% and 4.7%, respectively, while <a href="https://www.smartkarma.com/entities/179" target="_blank" data-smartkarma-citation="entities:179:1">Baidu Inc (ADR) (BIDU US)</a>'s results were in line with significantly reduced consensus.</li>
<li>Baidu's revenue guidance for 3Q16 was roughly 7% below consensus, and implies zero growth year over year. But more worrying is the significant rise in traffic acquisition cost, which lowered the gross margin on its online marketing revenue by more than 400 bps.</li>
<li>Alphabet's growth was strong across…</li>
</ul>


For 2Q16, Alphabet Inc Cl C (GOOG US)'s revenue and non-GAAP EPS beat consensus by 3.5% and 4.7%, respectively, while Baidu Inc (ADR) (BIDU US)'s results were in line with significantly reduced consensus.
Baidu's revenue guidance for 3Q16 was roughly 7% below consensus, and implies zero growth year over year. But more worrying is the significant rise in traffic acquisition cost, which lowered the gross margin on its online marketing revenue by more than 400 bps.
Alphabet's growth was strong across…


Post 2Q16 Results: Alphabet Continued to Beat Baidu on Growth, Valuation and Risks