Tuesday, April 29, 2008

Zacks buy recommendation

"Using a P/E multiple of approximately 71.4x
our fiscal year 2009 earnings per share
estimate yields a target price of $450,
which we believe reflects the company's
growth prospects. Therefore, we are
maintaining a Buy recommendation for
Baidu's stock."

Friday, April 25, 2008

Analyst take on Q1 08 - Pacific Crest and Piper Jaffray

* Steve Weinstein, Pacific Crest: Keeps
Outperform rating and raises target price to
$405 from $350, based on a valuation of 60x 2009
EPS of $6.75. "We consider this reasonable given
Baidu’s growth, market dominance and potential for

* Gene Munster, Piper Jaffray: "The Street can
debate the beat in March, but the positive guidance
is undeniable," he writes. Munster maintains his
Buy rating and $430 price target.

Analyst take on Q1 08 - Deutsche bank & Canaccord Adams

# George Chu, Deutsche Bank: Cut rating on the stock
to Sell, from Neutral, citing margin concerns; notes
while revenue in the quarter beat his forecast by 7%,
EPS only beat by 3%. He says rising costs of acquiring
traffic could pressure margins.

# Colin Gillis, Canaccord Adams: Gillis repeated his
Sell rating and $265 target on the stock. He says the
valuation is expensive; that Street expectations for
the second half may be too high; that the company
could be vulnerable to litigation about MP3 downloads;
that there is uncertainty it can monetize its foray
into Japan; and that a boost in spending from the
Olympics “may wane faster than expected.”

Analyst take on Q1 08 - S&P Research

S&P analyst, S. Kessler, says, "BIDU posts Q1 p
er-ADS profit of $0.60 vs. $0.32, $0.08 below
our forecast. Revenues rose 108%, above our
estimate, on continuing gains in the number of
customers and revenue per client. But we have
concerns about margins, hurt by growing traffic
acquisition costs and notable spending on sales
and R&D. We are cutting our '08 per-ADS earnings
projection to $3.68 from $3.91, but raising our
'09 estimate to $6.30 from $5.88 on moderating
investment growth. Based on revised peer analysis,
we are lifting our target price to $350 from $300,
but see BIDU as overvalued at current prices."

Analyst take on Q1 08 - Susquehanna

Susquehanna's Ming Zhao maintains a positive
rating with a price target of $375.

Analyst take on Q1 08 - Citi

Citigroup analyst Jason Brueschke says Baidu's
$81.9 million first quarter revenue and $0.67
EPADS topped his and Street estimates; as did
$111-$114 million second quarter revenue guidance.

He notes the company benefited in the first
quarter from conservative guidance, effects of
an early Chinese New Year, and the bringing of
key sales regions in-house. He says, equally
important, was although BIDU guided to 2008 profit
and loss impact of $20-$25 million for Japan, plus
$5-$7 million (his estimate) spending on consumer
to consumer e-commerce, only $4.3 million was spent
in the first quarter 2008 -- far below implied
pro-rata spending. He expects BIDU will continue to
under-spend, further cushioning earnings in 2008.

Brueschke raises $3.80 2008 EPADS estimate to $4.07,
$6.82 2009 EPS to $6.87 and $350 price target to $415.
Jason Brueschke upgrades Baidu shares to "Buy"
from "Hold" on the Q1 results, and lifts his price
target to $415 per share from $350. Says Baidu
is doing a good job of keeping costs down.

Analyst take on Q1 08 - UBS

Downgrades to a sell from neutral with a
price target of $290. Margin compression
cited as the main reason.

Analyst take on Q1 08 - Credit Suisse

- 1Q08 dil. EPS was US$0.60, in-line with
Bloomberg consensus, due to strong revenue
and lower tax rate. 1Q08 revenue was 4.8%
above high end of guidance due to traffic
growth and, in our view, keyword pricing
rebound in Mar 08. Gross margin in 1Q08
was 60.2%, down from 62.2% in 4Q07, due
to seasonality and rising traffic acquisition
costs (% of revenue). Net cash per ADR was

- Active customer in 1Q08 was 161,000, up
43.8% YoY, whereas ARPU was up 45% YoY. Despite
large SMEs base in China, Baidu customer
growth rate has been below ARPU growth in four
consecutive quarters. TAC (% of total revenue)
was 13.3% in 1Q08, higher than 12.7% in 4Q07.
Due to rising reliance on the 160-170k Baidu
Union, TAC % will increase to 14.3% in 4Q08.

- 2Q08 revenue guidance at RMB780-800 mn
implied YoY growth rate at 94-99% only, down
from 108% in 1Q08 and 109% in 2Q07. As guidance
below our forecast, we cut 08 dil. EPS by 7%.
DCF target price was cut from US$251 to US$245.
Trading at 70x PER and 1.7x PEG, Baidu is not
attractive. Reiterate Underperform.

Analyst take on Q1 08 - Goldman Sachs

Baidu reported 1Q net revenue, operating income
and EPS of Rmb 539mn (up 108% yoy), Rmb 164mn (up
90% yoy), and Rmb 4.68 versus our 507mn, 148mn,
and 4.50 estimates. Revenue outperformance of 6%
reflected solid customer growth with ~ 6,000
additions vs. our 4,500 estimate and 45% yoy
growth in spending per customer vs. our 38% yoy
estimate. Top-line growth of 108% decelerated
fractionally from 110% yoy in 4Q2007 with 2Q2008
guidance implying a steeper deceleration against
a tough comp in the year-ago period. Higher TAC,
SG&A, and R&D costs resulted in EBITDA only
exceeding our estimate by 3%. GAAP net income
was largely inline with our estimate, not helped
by lower interest income and higher taxes. We are
raising our revenue and EPS estimates by 6% and 4%
respectively, and our price target to $310 from
$280 previously.

Revenue growth of 1% qoq in 1Q2008 compared with
2% qoq in 1Q2007. Interestingly, consensus
originally modeled a flat revenue quarter, before
Baidu guided for a 5% revenue decline at its 4Q
results. 2Q guidance is for 38% qoq growth at the
midpoint, consistent with our estimate for 39% qoq
though off a bigger base, and against 46% qoq revenue
growth in 2Q2007. TAC again rose on more affiliates,
while operating expenses climbed on headcount
additions in a seasonally low-revenue quarter. If
the China Netcom partnership generates material
revenue, then TAC should rise sharply further in 2Q2008.

Our 6-month price target of $310 (versus $280 previously)
is based on P/E to normalized growth and a DCF analysis
and implies 77X our 2008E, 51X 2009E, and 36X 2010E EPS.

Key risks
1) Paying customer additions; 2) competition from Google
and Alibaba Group, and 3) capex.

Analyst take on Q1 08 - JP Morgan

Baidu reported 1Q08 revenue of Rmb 574.4M (up
0.6% QoQ, 108% YoY). In US$, revenue is US$ 81.9M
(up 5% QoQ, 130% YoY). This is ahead of our
forecast of flat growth, and consensus of
US$75.4M. GAAP EPS of US$0.60 (down 31% QoQ,
up 88% YoY) is inline with consensus (US$0.60)
but below our forecast of US$0.63. 2Q08 guidance
of US$111M – US$114M surprised on the upside,
ahead of consensus forecast of US$100.6M.

Raising 08 & 09 revenue forecast by ~8%, but we
kept 08 GAAP EPS flat and revised down 09 EPS
by 2%, to US$4.25 & US$6.74, respectively, due
to higher TAC (traffic acquisition cost) and tax
rate assumptions. However, we are not overly
concerned about TAC increases, as operating
margin as % of net revenue (excl. TAC) is still
inline with historic seasonality.

Maintain Dec-08 PT of US$380, implies 89.5x 2008E,
56.3x 2009E, and 37.0x 2010E diluted GAAP P/E (or
84.6x 2008E, 54.4x 2009E, and 36.2x 2010E diluted
adjusted P/E). Despite only ~10% upside to our PT,
we maintain OW rating on Baidu. We believe Baidu
can likely leverage its leading search traffic
and offer new profit opportunities – latest being
online games.

Share price drivers are: (1) margins improvements
in 2H08 on better leverage & launch of C2C service,
(2) potential earnings upside.

Strong 2Q08 guidance:
Baidu guides 2Q08 revenue of Rmb 780M to Rmb 800M
(US$111M to US$ 114M), or up 35.8% to 39.3% QoQ.
Guidance is ahead of our forecast of US$104M and
consensus of US$99.2M.

Operating Stats:
No. of active online marketing customers was 161k,
up from 155k in 4Q07 and 112k in 1Q07 (up 3.9%QoQ
and 43.8% YoY). We believe the good growth is
driven by increased sales and marketing efforts
during the quarter.

Average spending per customers was Rmb 3,557,
down 3.2% QoQ, but up 45.1% YoY.

Costs and Margins:
TAC: 1Q08 Traffic acquisition costs was 13.3% of
total revenue - above our estimates of 12.8%.
This compares to 10.3% in 1Q07 and 12.7% in 4Q07.
Depreciation expense: was 9.3% of total revenue,
above 8.2% level in 2H07.
Adj. gross margin (excluding share base comps): is
60.4% down from 62.3% in 4Q07 and 63.1% in 1Q07.
This is mainly due to increase in server depreciation
expense and TAC as % of revenue.

SG&A expense were Rmb 147M (or US$21M). This includes
Japan related expense of Rmb 30.1M (or US$4.3M) - this
compares to company full year Japan spending of
US$20M - US$25M. Adj. operating margin(excluding share
base comps): is 28.5% down from 33.2% in 4Q07 and
31.2% in 1Q07. Operating margin decline is inline with
expectation, as revenue base growth was slow in 1Q08.

Tax rate: Tax rate was 6.9% in 1Q08, ahead of our
forecast of 3%. On the other hand, long-term deferred
tax asset increased from Rmb 15.7M in 4Q07 to Rmb 20.5M
in 1Q08. We look for management guidance on tax rates
and impacts on new tax rules at the call.

Analyst take on Q1 08 - Merrill Lynch

Costs under control; maintain Buy with PO of US$412
EPS of US$0.6 was inline with consensus estimate on
better-than-expected revenue (5% above consensus),
controlled G&A and R&D expenses, but lower non-op
income. Japan-website cost about US$4m, again
in-check. We remain positive on the search trends
in China but don’t expect new initiatives such as
the Japanese website, mobile search and online games,
to contribute materially before 2010. Maintain Buy
with DCF-based PO slightly up to US$412 (from
US$410). Risks are major services issues, regulation
on Internet and competition.

Source: paid research

Thursday, April 24, 2008

Baidu to promote Video ad products

VP of operations, Shen Haoyu, said yesterday Baidu
is focusing on a range of Baidu Alliance products
and on video ads on Baidu TV. These are just like
regular TV ads, but can be customized for the
website or context.

RBC positive on Baidu's earnings outlook

Expects them to beat estimates and raise guidance.
After a challenging qtr, affected by weather and
mgmt change, traffic rebounded in Feb after the
Chinese New Year and remained robust throughout
March. Firm expects the co to beat 1Q08 ests and
issue 2Q08 guidance in excess of consensus. Street
EPS ests for 2009 should head higher after the
report by about $0.50-1.00, and firm expects
their price target to follow accordingly.

Wednesday, April 23, 2008

Unconfirmed Analysys report

Total Q1 08 search market: 947 million RMB
Google share: 26.8%
Baidu share : 60.7%

With a dollar/yuan rate of 7.1 (March 31st rate),
that works out to $80.96 million - above the
highest analyst estimate of $79.2 million. However
the gains are from Yuan appreciation. Per these
numbers, the search market actually has shrunk
2.6% from Q4 07, the first time that has happened.

[Added on 04/25: Baidu's actual numbers have been
81.9 million, about 1.2% higher.]

Teaming up with Japan's Waseda University

As per hexun.com, Baidu is partnering with Waseda to develop
new Internet search technology and web resources that analyze
the Japanese market.

Tuesday, April 22, 2008

Susquehanna out positive

As per the firm, "Near term, the upside is mainly driven
by monetization enhancement, though we prefer to see
traffic growth as a stronger factor. We note longer term
e-Commerce and Internet infrastructure are becoming more
favorable for Baidu's search business."

Price target upped from $315 to $375 and positive rating
maintained. [Editor's note: Susquehanna previously had a
policy of not providing price targets, seems they changed

Expects company guidance and consensus estimates to be
modestly over expectation. Customer acquisition in March
seen to be strong, indicating a good Q2.

Monday, April 21, 2008

Baidu launches online games

Baidu has launched 6 browser-based games at

The 6 games are: Zongheng Tianxia in partnership with
Shanda, Tiankong Zuo'an in partership with Huancheng
Interactive, Fangbianmian Sanguo, Luanwu Chunqiu,
Empire, and XBA Manager, all with Xin Yu Brothers
Internet Technology, better known as 51wan.com. The
Shanda and 51wan games require separate accounts
with those companies; the others can be accessed
with a Baidu Games channel account. A server for the
platform games will open on April 23rd.

Friday, April 18, 2008

JP Morgan bullish on 1Q08 prospects for Baidu

Jan and Feb weak due to the snowstorm, but March
very strong. April also stronger than usual due
to searches for Olympic torch relay news. JPM
believes there is upside to 1Q08 estimates, with
traffic being flat from Q407 instead of being
down as per earlier estimates.

Forecasts 2Q08 sales of US$104.2M (up 98% YoY,
up 40% QoQ), adj. EPS of US$1.04 (up 82% YoY,
up 52% QoQ). I don't think JPM is taking Yuan
appreciation into account. Their target price
is $380.

Monday, April 14, 2008

Q1 2008 earnings report on April 24th

Earnings will be reported sometime after the markets
close at 1:00 PM California time. The conference call,
hosted from Hong Kong, will be at 5:00 PM California

Personal homepage service launched

Unlike iGoogle, Baidu doesn’t let you add your
own news feeds, or widgets.

It does allow a couple of handy assistants,
news collection and search keyword trends.
Baidu news aggregation is the best in China.

Monday, April 7, 2008

Barack Obama Baidu's homepage hero

Obama is the 6th, and the first foreign, face
to grace its homepage logo. The selection is
based on search popularity and Baidu "values".
Baidu started incorporating pictures of
modern-day personalities into its logo last

Haier cooperation agreement

Baidu and Haier are entering into a
strategic cooperation to jointly
promote online media television
services. Baidu will provide Internet
services and technology support such
as search and online community to
Haier's online television scheme,
which enables Chinese TV users to
access Baidu's services with a
remote control.

Baidu is aiming at making its brand
ubiquitous among traditional desktop
computer users and those users who
traditionally would not have access
to the search engine's features. Baidu
previously began a strategic cooperation
with Nokia which enabled Chinese users
to use mobile phones to enjoy Baidu's
search services from a cellphone.
In 2008, the company launched voice
search via telephones.
China TechNews report

IFPI lawsuit against Baidu accepted

yesterday. The suit was filed almost 2 months
ago. Damages of $9 million sought.

Thursday, April 3, 2008

Baidu entering WiMax search market

A representative from Shanghai's Jiading
county, which is currently working towards
becoming a wireless zone, has disclosed
that they are cooperating with Baidu to
proceed with the development of a wireless
search service, which is an integral part
of their plan for being a wireless area.

A representative from Baidu has also said
that the company will participate in the
building and creation of applications for
the wireless network, which is not only
being done in Shanghai, but also in other
Chinese cities like Shenzhen, Beijing,
Dongguan and Changde. It is expected to
be popularized in 25 medium and big cities
by the end of this year.

ChinaTech news

China Netcom agreement with Baidu

Fixed-line telecom operator China Netcom
and Baidu signed a cooperation agreement,
effective immediately, in the area of
online search. Under the agreement,
when Netcom users enter incorrect
address data in their browser's URL
field, they will be redirected to an
intelligent guidance page with an
embedded Baidu search frame. The Baidu
guide will provide friendly tips to
help users find the data they need.
The page will also display Baidu news,
web, MP3, Q&A (Baidu Knows), and Post
Bar data for users to choose from.
The service will be rolled out to
Netcom users nationwide.

Wednesday, April 2, 2008


Baidu (Nasdaq: BIDU) announced on Wednesday
it has appointed Mr. Peng Ye as COO effective
April 25. Peng is now country general manager
for Apple China. Ye previously held management
positions at SatCom AG, Motorola and Nortel.

Baidu allies with 15 radio stations

Chinese search engine provider Baidu.com (BIDU)
signed deals with 15 radio stations in China to
provide a free online listening service.

The Radio Alliance service is currently available
under Baidu's MP3 Channel and through it users
can search for and listen to real-time programs
of radio stations in different parts of the
country. The first batch of Baidu's partners
on this service are mainly music program
providers. In addition, Baidu will continue to
develop more functions for the service, such as
downloading, program ordering and program