Jefferies Downgrades Baidu

In a report published Friday, analysts at Jefferies downgraded Baidu, Inc. BIDU from Buy to Hold. The price target was also lowered from $253 to $196. The company has posted its 1Q15 revenue below the consensus, while guiding to a weaker than anticipated 2Q. According to Jefferies, advertising have begun to shift part of their ad budget from keyword search to Guangdiantong performance-based ads from Tencent Holdings Ltd (HKG: 0700), driven by the fact that the latter offers similar if not better ROI from advertising. "Despite large recurring investments in O2O, we hold the view that Baidu's lack of a strong payment tool limits its O2O monetization potential. Despite recurring investment, closing the loop of O2O transactions and driving monetization will prove challenging for Baidu without a strong payment tool, in our view," the analysts added. Jefferies also believes the Tencent's public subscription accounts, as well as Alipay public accounts, could offer stiff competition for Baidu's O2O.
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