To The Moon

$Baidu(BIDU)$ is scheduled to report its Q3 2023 results on 21 Nov 2023 (Tuesday). Market is expecting Baidu to report a swing to a net profit of 4.89 billion yuan ($678.1 million) for Q3 2023 compared to same period from a year ago (where they have reported a net loss).

Baidu (BIDU) Last Reported Earnings (Q2 2023)

Baidu shares gained +2.8% the day following the earnings announcement on 22 Aug 2023 to close at 128.36. Following its earnings release, 89 days ago, BIDU stock has drifted -15.8% lower.

From the time it announced earnings, BIDU traded in a range between 103.32 and 151.00. The last price (108.10) is closer to the lower end of range.

Baidu (BIDU) Upcoming Earnings Guidance

BIDU has issued earnings guidance for Q4 2023. Revenue estimate in the range of 4.81 B to 5.27 B, which would be a 9% increase from the same period last year.

Baidu (BIDU) Past EPS and Revenue Estimates and Surprises

As we can see that Baidu have been providing surprises for EPS and revenue estimate, with an expected swing to profits as compared to same period last year.

I believe Baidu would be coming in to beat EPS estimate by a good margin as compared to the past 2 reported quarters.

Baidu (BIDU) Historical Moves Ahead of Earnings

Baidu stock had mixed performance leading up to earnings. Shares of Baidu share traded lower, on average, in the two day periods heading into an earnings report. The best performance was two weeks ahead of earnings for an average gain of 2.7%

Baidu (BIDU) Historical Stock Price Reaction to Earnings

Baidu shares have moved lower in the immediate aftermath of earnings 7 out of 12 previous reports. On average the stock moved up 0.3% in the first day of trading after the company reported earnings.

Baidu (BIDU) Stock Behavior After Earnings

Based on the previous 12 earnings releases, Baidu is more likely to trade higher 1 day after earnings for an average gain of 1.1%

Baidu (BIDU) Post Earnings Announcement Drift

Baidu share price has drifted down -15.8% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is 6.6%. The current drift represents a negative -0.4 standard deviation move.

• Current post earnings announcement drift: -15.8%

• Historical average post earnings announcement drift: 6.6%

• Historical post earnings drift standard deviation move: ±41.6%

Baidu (BIDU) Post Earnings Movement

The options market overestimated Baidu stocks earnings move 92% of the time in the last 12 quarters. The predicted move after earnings announcement was ±6.8% on average vs an average of the actual earnings moves of 4.4% (in absolute terms).

Baidu (BIDU) Earnings Implied Volatility Crush

Baidu's last earnings implied volatility (IV30) going into earnings was 45.7. The last time BIDU released earnings, the implied volatility dropped to 40.6, resulting in an implied volatility crush of 11%. 5 days after earnings, the 30 day IV was 37.2.

• Average Implied Volatility Crush For BIDU Earnings: 11%

• Average 30 Day Implied Volatility 1 Day Before Earnings: 54.0

• Average BIDU 30 Day IV for the Day of Earnings: 47.8

• Average 30 Day Implied Volatility 5 Days After Earnings: 49.1

Baidu (BIDU) Implied Volatility Skew

Baidu implied volatilty skew for downside puts is increasing as compared to the upside calls, This suggests that marker is pricing in a larger fear to a downside move.

The current skew indicator suggest a slightly bearish signal.

Summary

Based on the data I have gathered, no doubt that Baidu have beaten the EPS and revenue estimates for 2 most recent quarters earnings, and its share price have also trended upwards.

I think the impact on Chinese economy recovery might take a toll on Baidu earnings, and their operating cost might be higher. Their Q4 guidance is not impressive.

I will be looking out for Baidu to share the detailed plan on how they might be monetizing their A.I. (Ernie). Do watch out for share price might be trading in volatile mode.

Appreciate if you could share your thoughts in the comment section whether you think Baidu would have a surge up when its guidance is good, and if they fell short, will we see a large decline?

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.