Analyst reaction: Citi raises PT to $385

Business largely back to normal - Baidu's strong
Q2 QoQ growth and Q3 guidance suggest that
the impact of the CCTV expose is largely over, and
the core business is back on track. With Baidu
adding sales headcount, Phoenix Nest set to improve
relevancy and monetization, and ARPU likely
to increase with the improving economy, the outlook
for the next 12 months is bright. While traffic
acquisition costs (TAC) likely will increase further, we
believe Baidu can moderate spend elsewhere (e.g.,
Japan, marketing, etc.) to protect OpM and hence
earnings. We maintain Buy and raise our TP to
US$385 (30x 2010E P/E), from US$260, as we roll
our valuation forward to a 2010 base.

[Citi now has an EPS estimate of $10.28 for 2010]