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China’s Shanghai Index erased earlier gains and is now trading lower for the session after search engine giant Baidu’s earnings report disappointed investors. Adding to the weakness was a plunge in shares of iQiyi. Baidu owns about 80.5% of iQiyi. Shares of the Netflix-style service fell after allegations of fraud by the U.S.
Early in the session, Chinese mainland shares rose with the Shanghai Composite up 0.11%, the Shenzhen Component Index up 0.81% and the Shenzhen Composite up 0.58%.
At 04:11 GMT, China’s Shanghai Index is trading 3315.45, down 5.28 or -0.16%.
China’s Baidu Posts Tepid Forecast as Ad Sales Remain under Pressure
China’s search engine giant Baidu, Inc. on Thursday forecast third-quarter revenue marginally below Wall Street estimates and warned of low visibility in business due to uncertainty from the coronavirus crisis, Reuters reported.
U.S.-listed shares of the company fell 5.5% in extended trading as investors looked past Baidu’s second-quarter profit and revenue beat.
The company expects current quarter revenue in the range of 26.3 billion Yuan to 28.7 billion Yuan, the midpoint of which is slightly below the average analyst estimate of 27.57 billion Yuan, according to IBES data from Refinitiv.
Baidu’s revenue from advertising still remains under pressure as big businesses in industries such as travel and financial services continue to pull back on ad spending.
Revenue from the company’s online marketing services, which includes search, news feeds and video apps and is a major contributor to overall sales, fell 8% to 17.7 billion Yuan in the second quarter ended June 30.
Membership revenue in Baidu’s Netflix-like streaming service, iQiyi, however, jumped 19%, arresting the total revenue decline to 1%.
Total revenue fell to 26.03 billion Yuan ($3.75 billion), edging past analysts’ estimates of 25.71 billion Yuan.
On an adjusted basis, Baidu earned 10.11 Yuan per American depository share (ADS), above expectations of 9.60 Yuan per ADS.
Chinese Netflix-Style Service iQiyi Tanks by 18% after US Regulators Investigate Fraud Allegations
Shares of Chinese streaming service iQiyi plunged in after-hours trade in the U.S. after it announced the Securities and Exchange Commission (SEC) has launched a probe into the company, CNBC reported.
The SEC investigation was prompted by a report in April from Wolfpack Research, which describes itself as an “activist research and due-diligence firm.” In that report, Wolfpack accused iQiyi of fraud and inflating its numbers.