Tuesday, April 28, 2009

Analyst take on Q1 2009

  • Pali Research analyst Tian Hou
  • today upgraded the stock to Neutral from Sell,
    noting that with the company’s launch of its
    Phoenix Next advertising system, “BIDU is
    making a proactive change to eventually migrate
    from its current model to a Google-like model,”
    Hou writes. “We view this as a significant step to
    reduce the risk associated with its current model,”
    which features an unclear mix of paid and natural
    search results. Hou also notes that Baidu spent
    heavily on advertising on China Central TV’s
    Chinese New Year gala, in what the analyst views
    as “a peace offering.” CCTV had previously run a
    series of reports on questionable business practices
    on the site.

  • Needham’s Mary May this morning likewise
  • upped the rating to Hold from Sell. “Trends
    suggest that conditions have improved significantly
    over the past several months, and at least for now
    advertiser activity is on the mend,” May writes. May
    adds that “it appears as though some of the
    regulatory challenges the firm faced during the past
    several months is behind us, and management will
    be able to focus on running the company.”

  • Bank of America/Merrill Lynch analyst Eddie
  • Leung today repeated his Buy rating on the stock,
    while boosting his target price to $258, from $147.
    He writes that the rollout of the Phoenix Next keyword
    bidding and matching system “appears to be smooth.”

  • Piper Jaffray analyst Gene Munster likewise
  • repeated his Buy rating and upped his target to
    $250 from $246, asserting that “shares of BIDU will
    trend higher given March results and June guidance
    indicate fundamentals are intact and China search
    opportunity remains in its early stage.”

  • Bernstein Research analyst Jeffrey Lindsay
  • repeated his Outperform rating and upped his target
    to $260, from $230. “We think the growth trajectory
    for Baidu is still higher than many expected at this
    point,” he writes. Lindsay also writes that the
    company is “more than holding share against Google,”
    and that both of them are mopping up against other
    China paid search sites.

  • By contrast, UBS analyst Wenlin Li today
  • repeated his Sell rating and $150 price target.
    Li assets that there were some issues with the quarter,
    in particular lower gross margins and rising traffic
    acquisition costs. Li also contends that Phoenix Nest is
    likely to be earnings dilutive in the short term, and that
    the impact on fundamentals will depend on how long it
    takes to transition to the new system.

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