Why One Analyst Says Baidu is On Track For Recovery

Baidu Inc BIDU reported a better-than-expected second-quarter print, and the report signals the company is on track for a recovery this year, according to Joseph Berger, CEO of Pacific Epoch, a provider of research on China's digital consumers.

The Analyst

Berger discussed Baidu's earnings during a CNBC interview Tuesday.

The Thesis

Baidu, a leading Chinese language internet search provider often referred to as the "Google of China," has seen its business suffer from lower revenue and regulatory changes over the years, Berger said. But the company's Q2 report offered evidence of a turnaround in the form of improvements in the news feed and dynamic ad businesses, the CEO said.

Berger's firsthand checks and surveys show Baidu is benefiting from a 40-percent year-over-year increase in adoption among advertisers, and they plan to spend more money on the platform in the coming quarters.

Baidu is looking to diversify its business away from online searches into venues such as autonomous driving and artificial intelligence, Berger said. From a strategic point of view, the decision is the correct one, as it signals the Chinese company's commitment to find new ways to enhance its ecosystem, he said.

"We think over the long run this is a positive for them."