Early investors in the Internet search business have been handsomely rewarded, most notably long-term holders of Google's parent, Alphabet GOOGL . But it might not be too late for those who missed the boat.
China's Baidu (BIDU) , a Chinese Internet service provider and search company with similarities to Google, is set to announce fourth-quarter earnings on Tuesday, which will give investors a chance to gauge the progress of the company's online-to-offline (O2O) initiative. Analysts are expecting the company to post fourth-quarter earnings of about $6.60 a share on Tuesday.
Another tantalizing likeness to Google comes from Baidu's driverless car project, which in December said that it "successfully" tested its prototype on roads near the company's headquarters in Beijing, using 3D maps that it developed on its own. The project is being managed, as with Google, under a separate business unit.
Baidu's search business, unlike Google, funds bricks-and-mortar businesses, driving consumers to those enterprises and to services via its search engine. Equity analysts who follow tech companies are fascinated, yet deeply divided in their opinions of the company's prospects. Twenty-two analysts rated Baidu a "buy" or "strong buy," according to Yahoo Finance, while eight call it a "hold" or "underperform."
Uncertainty among analysts and investors regarding Baidu's latest earnings stems from how much the company has invested in O2O. Last June the company announced it would spend about $3.2 billion over three years to bolster such businesses, which sells to customers that initially have been captured online. In some ways, the model sounds a bit like Groupon (GRPN) , a one-time high-flier that lately has struggled.
"Ultimately, what Baidu is building and offering is much broader than a daily-deals business," Robin Li, CEO, told analysts in October. "We are creating an online-marketing and transaction-services platform, bringing to bear the power of our entire platform across search, maps, Nuomi, Takeout Delivery and Baidu Wallet. Our platform benefits from shared synergies, with traffic and data from search and maps enhancing the growth of our newer products."
Since December, as evidence of economic softening in China has rocked global markets, American depositary receipts of Baidu have lost about a third of their value.
The company's interest in driverless vehicles remains a potential kicker to its main line of revenue.
Google has said it wants to develop the technology mainly to enhance safety, prevent accidents and to save lives. Fair enough, though both companies surely realize that the advent of driverless technology is likely to upset many conventional assumptions we have for personal transportation. One of those is that a device once used mainly to move people may also become -- with drivers and passengers safely free to do as they please -- a primary platform for texting, consuming information and shopping.
Alphabet is a holding in Jim Cramer's Action Alerts PLUS portfolio.