Piper raises PT to $468

Piper Jaffray analysts Gene Munster and Vivian B. Li
increased their price target from $430 to $468 and
maintained their Buy rating. In addition, they
increased their FY 08 EPS estimate from $4.00 to $4.25,
and raised their FY 09 EPS estimate from $6.14 to $6.68.

The analysts said, "Baidu reported a solid June quarter,
and guided in line with the Street estimate for the Sept
qtr. We believe the company's business remains strong
given: 1) healthy growth in term of both number of
customers (up 41%y/y) and ARPU (up 59% y/y), 2) it is
acquiring more large advertisers in addition to the usual
SMEs, 3) positive traction with new products such as
My Marketing Center, 4) improved margin, and 5) clear
focus on improving search relevance, monetization
capacity, and sales and customer service quality."

In addition, they highlighted Baidu management views
the Olympics as a as a two-month event (7/20-9/20) rather
than the typical Street thinking of a two-week event
(8/8-8/24). Management emphasizes the long term benefit
of attracting internet users to use Baidu search through
the event. However, the analysts believe the company will
face some headwinds "during the game period given traffic
is likely to decrease as users are distracted by the Game,
as well as business and marketing activities being slow
given government is regulating traffic and pollution."

They believe Baidu’s margins "will remain stable in the
lower 30%'s range for the next couple quarters given
that 1) there is still room to grow in terms of bringing
down bandwidth and depreciation cost, 2) no plans for
high promotional cost during the Olympics, 3) no plans
to increase headcount significantly (currently 6800
employees), and 4) previous guidance of $20-25m spending
on Baidu Japan still on track."