On Thursday, US Tiger Securities maintained its Buy rating and $135.00 stock price target for Baidu (NASDAQ:BIDU) shares. The firm's analyst noted that despite adjusting third-quarter revenue estimates downwards due to a weaker macroeconomic environment in China, the firm continues to endorse a Buy rating for the technology giant.
The revised forecast anticipates a year-over-year decline of 4.5% in Baidu Core's advertising revenue for the third quarter, a steeper drop than the previously estimated 3.5%.
China's gross domestic product (GDP) growth for the third quarter was reported at 4.6% year-over-year, a slight deceleration from the 4.7% growth rate in the second quarter. Weak domestic demand was particularly evident in sectors such as real estate, franchising, and healthcare during the third quarter, which had a direct impact on Baidu's advertising segment.
Moreover, the analyst pointed out that under-monetized AI-generated search results have also negatively influenced the company's revenue.
Looking ahead to the fourth quarter, Tiger Securities has not seen signs of macroeconomic improvement, despite the introduction of a stimulus package. As a result, the firm has lowered its fourth-quarter revenue projections for Baidu Core by 2%. The analyst expressed the expectation that significant macroeconomic enhancement is likely to occur in early 2025.
The analyst also suggested that if the current macroeconomic weakness persists, it might prompt the Chinese government to implement additional easing policies. Such measures could potentially bolster Baidu's stock price, according to the firm's analysis.
In other recent news, Baidu reported an 8% year-over-year growth in non-GAAP operating profit and a total revenue from Baidu Core of RMB 26.7 billion in its Q2 2024 earnings report. The company's AI Cloud business is projected to maintain its double-digit growth trajectory, expected to increase by 16% in the third quarter.
Following these developments, Jefferies revised its price target for Baidu to $139.00, while maintaining a Buy rating. Loop Capital also adjusted its outlook on Baidu, reducing the price target from $120.00 to $115.00, but still recommending the stock as a Buy.
Conversely, HSBC downgraded Baidu's stock from Buy to Hold, adjusting its price target to $100 due to updated beta and currency estimates, increased competition, and a weaker advertising outlook. Bernstein SocGen Group also downgraded Baidu's shares to Market Perform and reduced the price target to $97, citing concerns over disruptions in the search segment.
On the other hand, Citi maintained its Buy rating and $144.00 stock price target for Baidu, noting the recent management changes at the company as potentially beneficial for long-term growth. These are the recent developments for Baidu, providing investors with a snapshot of the company's performance and analyst perspectives.
InvestingPro Insights
Baidu's financial metrics and market performance offer additional context to the analyst's outlook. The company's P/E ratio of 11.02 and P/B ratio of 0.88 suggest that the stock may be undervalued, aligning with US Tiger Securities' Buy rating. Despite the challenging macroeconomic environment noted in the article, Baidu has maintained a solid gross profit margin of 51.5% over the last twelve months as of Q2 2024, indicating resilience in its core business.
InvestingPro Tips highlight that Baidu's earnings per share have grown over the past year, and analysts are projecting the company to be profitable this year. These insights support the analyst's long-term positive outlook, despite short-term revenue challenges. The fair value estimate of $129.74 based on analyst targets also reinforces the $135.00 price target mentioned in the article.
For investors seeking a deeper understanding of Baidu's potential, InvestingPro offers 17 additional tips that could provide valuable insights into the company's prospects amidst the current economic landscape in China.
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