What to Expect From Baidu Earnings Monday

Shares of China internet and telecom giant Baidu (BIDU), which reports earnings Monday, were down more than 4% at the open as traders parse the outcomes of the Xi-Trump summit.

One trade topic in meetings between Presidents Xi Jinping and Donald Trump was the potential for China to purchase more from the U.S., from semiconductors to crude oil. Baidu has been considering a Shanghai and Hong Kong listing of an AI chip subsidiary. Nvidia's (NVDA) effort to restart AI chip sales into China appears stalled despite U.S. approval, underscoring a tech decoupling between Washington and Beijing, as we noted Thursday.

Analysts expect weaker profitability at $1.87 per share against last year’s figure of $2.55 (-26.7%), while revenue consensus estimates call for $4.66B vs. $4.47B last year (+4.27%). Baidu, with a market capitalization of $48.7 billion, is roughly 13% below its 52-week high of $165.30.

Baidu’s chart presents an interesting technical picture. The low point established after an upside gap near 108 on Sept. 8 has held firm as a supportive area several more times during mid-November as well as late March to mid-April. From there, price formed an example of an inverse head-and-shoulders type pattern, with the aforementioned supportive area representing the “head” and the corresponding “shoulder” areas developing from about 115 to 120 in early March and late April. This typically bullish setup played out to the upside with a break above a resistance zone between about 129 to 133, which is demarcated by several gap levels.

That same 133 is now the relative low to watch as price travels in an upward channel type shape. However, despite this bullish upswing, price has stalled out for now around old highs near 150 from Feb. 10, this presents a potential breakout area to watch for after earnings roll in.

One noteworthy piece of information based on the expected move projections from the options market is that the Jun. 18, Jul. 17, and Aug. 21 expirations show potential highs of around 162, 167, and 170.50, respectively – none of which offer significant gains beyond the 52-week highs of 165.30 from Jan. 22. Meanwhile, the potential lows for Jul. 17 and Aug. 21 come in around 109 and 105.50, which line up with the previously mentioned supportive lows near 108. Both of which seem to be important lines in the sand based on the market, so traders may want to keep an eye on these regions going forward.

Dimitra DeFotis contributed to this article.

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