Baidu shares slide as Barclays downgrades on ad revenue outlook

Published 11/22/2024, 08:56 AM
© Reuters.
BIDU
-
9888
-

Investing.com -- Baidu (NASDAQ:BIDU) US-listed shares fell nearly 3% in premarket trading Friday after Barclays (LON:BARC) analysts downgraded the stock to Equal Weight from Overweight and cut the price target from to $83 from $115.

The revision comes amid pressures from the Chinese internet giant’s growing focus on generative AI, which “exacerbates pressure” on advertising growth, Barclays analysts noted.

Baidu's Q3 advertising revenue saw a year-over-year decline of 4.6%, following a 2% decline in the second quarter. The company expects an even steeper decline in advertising revenue year-over-year for the fourth quarter.

The overall advertising environment in China remains weak, and Baidu's aggressive investment in genAI is contributing to financial pressures. Approximately 20% of Baidu's search queries now return genAI results, which are monetized at lower rates than traditional search queries, according to Barclays.

“The dilemma BIDU is faced with could either result in one of the greatest opportunities for BIDU or could pose one of the greatest threats to the company as genAI may disrupt competitive landscape in multiple tech and non-tech sectors,” analysts led by Jiong Shao said.

“As BIDU executes on its aggressive push in AI in the coming quarters, the decline in its ad revenues may persist, dragging margins down. We therefore move to the sidelines,” they added.

Barclays also pointed out several positives from the latest report, such as Baidu's cloud business growing over 10% in the third quarter, although the growth was slower than expected. Moreover, the company has maintained well-controlled operating expenses.

Looking ahead, the investment bank said it will closely monitor the pace of the decline in advertising revenues, the potential decrease in profit margins, and any loss of market share in search as competitors intensify their efforts in this area.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.