Is Baidu Stock a Buy? – Motley Fool

Baidu‘s (NASDAQ:BIDU) stock recently dipped after the Chinese tech giant posted its fourth-quarter earnings. Its revenue rose 5% year over year to 30.26 billion yuan ($4.64 billion), marking its second straight quarter of sales growth but narrowly missing estimates by $20 million. Its adjusted net income fell 25% to 6.87 billion yuan ($1.05 billion), or $3.08 per share, but beat expectations by $0.49 a share. Baidu expects its revenue to rise 15%-26% year over year in the first quarter.

Those headline numbers look stable, but is Baidu’s stock still worth buying after more than doubling over the past 12 months?

A young woman uses her smartphone in the middle of a crowded crosswalk.

Image source: Getty Images.

Baidu still hasn’t fixed its biggest problem

Baidu generated 68% of its revenue from its online marketing services in the fourth quarter, compared to 72% a year ago. This core business mainly sells ads on its search engine, portal sites, and other apps.

Its revenue dipped 0.3% year over year to 20.71 billion yuan ($3.17 billion) during the quarter, marking its seventh straight quarter of declining sales. On the bright side, its revenue rose 2.5% sequentially.

Unfortunately, the growth of Baidu’s advertising business is dismal compared to that of many of its Chinese peers. In their latest quarters, Tencent‘s (OTC:TCEHY) online advertising revenue rose 16% year over year, as Bilibili‘s (NASDAQ:BILI) advertising revenue soared 126%.

Baidu attributes its sluggish ad