On Friday, Citi analysts issued an update on Baidu (NASDAQ:BIDU) shares, adjusting the price target to $139 from the previous $141, while sustaining a Buy rating on the stock. Currently trading at $82.92, Baidu appears undervalued according to InvestingPro analysis, with analyst targets ranging from $76 to $156. Citi's Alicia Yap provided insights into the revised target, foreseeing a potential near-term catalyst and highlighting the company's ongoing transformation.
According to Yap, Baidu is set to report its fourth-quarter earnings for 2024 on February 18. With a strong financial health score of 3.07 (rated as "GREAT" by InvestingPro), the company maintains a healthy gross profit margin of 51.1% and solid current ratio of 2.19. The report takes into account the adjusted revenue assumptions for Baidu's core search business, which were initially modified in a November note. The expectations suggest that the first quarter of 2025 may mark the lowest point in the company's search transformation.
The updated analysis includes revised estimates for iQiyi and factors in the impact of recent operational challenges faced by Jidu, an automotive company related to Baidu. A news report from December 12, 2025, by 36kr indicated that Jidu's difficulties might lead to a bad-debt write-off and a one-time expense for employee welfare payments.
Citi forecasts a 4.5% year-over-year decline in total revenue for the fourth quarter of 2024, amounting to Rmb33.4 billion, and a 33% drop in non-GAAP net profit to Rmb5.2 billion. The sum-of-the-parts (SOTP) valuation has been slightly reduced to reflect these changes.
Looking ahead into the first quarter of 2025 and beyond, Yap notes that while Baidu's advertising revenue growth is tied to the broader economic climate and advertiser sentiment, the company's strategic shift towards AI-enhanced search could be reaching a turning point with potential for monetization.
Trading at a P/E ratio of 10.56 and price-to-book of 0.82, the maintenance of a Buy rating is supported by what Citi considers a reasonable valuation, attainable consensus forecasts, and the possibility of increased returns to shareholders. For deeper insights into Baidu's valuation and growth prospects, access the comprehensive Pro Research Report available on InvestingPro, which includes detailed analysis of the company's AI initiatives and financial outlook.
In other recent news, Baidu has seen a range of analyst adjustments. US Tiger Securities and BofA Securities maintain a Buy rating on Baidu, despite challenges in ad revenue growth and one-off costs associated with the restructuring of Jiyue, Baidu's electric vehicle joint venture. Both firms maintain their price targets at $120.00 and $104.00, respectively. They anticipate a turnaround opportunity for Baidu in 2025, with revenue growth expected to re-accelerate.
Jefferies also maintained a Buy rating on Baidu, raising its price target slightly to $128. The firm predicts a narrowing decline in advertising revenue in 2025 due to strategic adjustments. Meanwhile, Bernstein and JPMorgan downgraded Baidu's stock to Neutral, citing concerns over Baidu's ability to monetize AI capabilities effectively. Bernstein lowered its price target from $90.00 to $87.00, and JPMorgan reduced Baidu's 2025 estimated adjusted earnings per share by 21%.
These recent developments highlight Baidu's ongoing commitment to AI and technology as it navigates a challenging macroeconomic environment. The company's AI Cloud business grew by 11%, and it continues its share buyback program, with $161 million of shares repurchased since early Q3. These are the recent developments for Baidu, as reported by several analysts.
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