Baidu Set For Good Quarter, But Analyst Cuts 2016 Search Outlook

Credit Suisse has cut Baidu Inc's (ADR)

2016 search outlook despite expecting good results for the fourth quarter. Chinese Internet giant Baidu will release its fourth-quarter numbers on Feb.25. Wall Street expects earnings of $6.55 a share on revenue of $18.56 billion. For the full year, analysts' consensus earnings estimate stands at $31.94 a share on revenue of $66.32 billion. Analyst Dick Wei noted that spending levels in Online-to-Offline (O2O), a business model that draws potential customers from online channels to physical stores, was muted in the fourth quarter of 2015. He sees competitors were more conservative on spending, given uncertainties in capital market. The analyst is more conservative on core search growth, driven by recent channel checks and weak guidance from peer Sogou. Wei cut his core search growth in 2016 to 21 percent from 25 percent due to concerns over potential further macro slowdown that could impact ad spending. In the longer-term, the analyst is still positive on search ad opportunities driven by sustained search usage and new revenue opportunities (from local search, app downloads, etc). Wei, who maintained his "outperform" rating on Baidu, also slashed the price target on the stock to $235 from $248 due to lower core search, Ctrip, and iQiyi value. Shares of Baidu were down 11 percent this year.