Baidu, Inc. (BIDU) shares rose more than 4% during Tuesday's session to briefly break out from the 50-day moving average at $110.90 before falling back below that level by the end of the session.
Second quarter revenue rose 1.1% to $3.84 billion, beating consensus estimates by $120 million, and non-GAAP net income came in at $1.47 per share, beating consensus estimates by 55 cents per share. Although Baidu surpassed estimates, the company's costs rose 12% to $847 million due to an increased investment in iQiyi content, traffic acquisition costs, bandwidth costs, and other costs. SG&A and R&D expenses also increased in the double digits.
Analysts have mixed thoughts on the second quarter financial results. For example, Benchmark analyst Fawne Jiang says that Baidu's solid Q2 results were offset by soft Q3 revenue guidance due to macro factors and industry headwinds. While she keeps her buy rating on the stock, she lowered her price target from $180 to $165, citing these concerning factors.
From a technical standpoint, the stock briefly broke out from the 50-day moving average to highs that haven't been seen since July, but it gave up those gains later in the session. The relative strength index (RSI) rose sharply to neutral territory with a reading of 55.38, but the moving average convergence divergence (MACD) experienced a bullish crossover. These indicators suggest that the stock could see more upside ahead.
Traders should watch for an extended breakout from the 50-day moving average and trendline resistance to ultimately fill its gap dating back to mid-May. If the stock breaks down from these levels, traders could see a move lower to retest its lows made earlier this month. The company's third quarter guidance was soft, but bulls remain in control of the market.
The author holds no position in the stock(s) mentioned except through passively managed index funds.