Market Overview

Baidu Shares Fall On Rumor Of Weak Quarter; Here's What Analysts Dispute


Shares of Baidu Inc (NASDAQ: BIDU) were lower on Wednesday following market chatter that the firm is expected to report a slow quarter.

A Baidu spokesperson declined to comment on the rumor of a weak quarter.

At least one analyst's recent research report supported the rumor of a weak quarter, while another presented the opposing side.

BNP Paribas: Paid Clicks Decelerated

Vey-Sern Ling of BNP Paribas commented in a note on June 23 that information released in its prospectus for a two-part bond offering indicated that paid clicks saw a 28.8 percent year-over-year growth in the first quarter. The analyst added that this represents a "sharp" drop from the 53.0 percent year-over-year growth in the previous quarter and falls short of the 40.20 percent growth seen in the full fiscal year 2014.

Nevertheless, the analyst maintained a favorable long-term view on the company. He noted that the slowdown in clicks could be due to the increasing maturity of mobile search monetization and "pronounced seasonal weakness" due to the late Chinese New Year.

"We remain positive on Baidu's medium-term growth and margin outlook, stemming from our optimism that the current heavy investments in O2O will eventually bear fruit," Ling concluded.

Shares were Buy rated with a $260 price target on June 23.

Summit Research: Industry Checks Support Solid Business

Henry Guo of Summit Research commented in a note on June 16 that concerns over revenue growth are "unfounded."

"We believe the concern overstates current monetization rates for Baidu mobile search, and overlooks mobile search's additional monetization opportunities versus PC search," Guo wrote in his note. "Further, our recent industry checks suggests Baidu's core search business remains solid, and we believe SME strength and the coming "618" shopping day promotion likely help drive top-line strength in the quarter."

Guo also suggested that Baidu's current blended mobile monetization rate only reaches 60 percent to 65 percent on PC, well below the 80 percent to 90 percent level estimated by some investors. As such, the analyst noted that Baidu has "plenty of room" to further monetize its mobile search traffic going forward.

Shares were Buy rated with a $256 price target on June 16.


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Posted-In: Baidu BNP Paribas China Internet Henry Guo PC MonetizationAnalyst Color Rumors Analyst Ratings

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