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Baidu's Price Target Cut 9% By Goldman

Baidu's Price Target Cut 9% By Goldman
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Baidu Inc (ADR) (NASDAQ: BIDU) lowered its 2Q16 revenue guidance after market close on June 13.

Goldman Sachs’ Piyush Mubayi maintains a Buy rating on the company, while lowering the price target from $220 to $200.

Revised Guidance

Baidu lowered its 2Q16 revenue guidance from the earlier Rmb20.1–20.6 billion to Rmb18.1–18.2 billion, significantly below the previous estimate.

The company attributed the revision to implementations made since the beginning of May to “deliver a better user experience and build a safer and more trustworthy platform for users.”

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These include “a) turning away customers that do not meet Baidu’s new requirements, b) weighing customer credibility more highly in the ranking algorithm, c) reducing the number of sponsored links, and d) upgrading the user feedback system and user protection system, etc.,” Mubayi mentioned.

What Management Expects

The analyst believes that the decline in customer numbers leads to a larger negative impact than decreased ad load, although management expects both to be positive for the company’s long term value proposition.

Mubayi also noted that management had limited visibility into “how long the hospital review process would take, but they have already seen some recovery in certain regions.”

In addition, following the recent changes, the company’s CPC/CPM has dipped but the click-through rate continues to be stable, and Baidu expects CPC/CPM to recover gradually over the long term.

“Management highlighted Baidu’s future growth drivers including integrated services to customers as well as new technologies,” such as autonomous driving and artificial intelligence, Mubayi added.

At Time Of Writing...

Baidu has fallen 4.56 percent in Tuesday's pre-market session, now sitting at $156.10.

Latest Ratings for BIDU

Jul 2017NomuraUpgradesNeutralBuy
Apr 2017BenchmarkInitiates Coverage OnBuy
Mar 2017BarclaysInitiates Coverage OnEqual-Weight

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