Baidu Set To Gain From Digital Transformation & ADAS Leadership, Analysts Say - Baidu (NASDAQ:BIDU)

Mizuho analyst James Lee maintained Baidu Inc BIDU with a Buy and lowered the price target from $200 to $180.
Baidu Core operating income was on-par with expectations despite facing macro impact and COVID challenges.
Management is laser-focused on improving efficiency while cutting variable expenses.
Concurrently, he believes the cost structure relating to G&A and R&D still has to improve as he heads into re-opening in FY23.
Although facing a short-term setback, he believes Baidu is well-positioned long-term due to digital transformation and leadership in ADAS.
As a result, he left his FY24 EBITDA of RMB 35 billion unchanged but reduced the price target on compressed industry multiples.
He found the stock attractive with re-opening in FY23 and call options in the cloud and ADAS.
Benchmark analyst Fawne Jiang reiterated a Buy and reduced the price target to $200.
Despite a challenging macro backdrop, BIDU delivered solid Q3 results with a substantial beat on margin and the bottom line driven by adequate cost savings.
The ad growth could remain pressured in the close quarters, given the company’s significant exposure to offline businesses and SMEs.
However, he highlighted the resilience of search (ROI driven) and the fundamental improvement of BIDU’s ad products, including its growing video-based ad inventories in feed and search and its more profound penetration into e-commerce and retail verticals. This should limit downside risks for BIDU in a soft macro environment.
Decelerated growth in the AI cloud was a disappointment for the quarter, but he anticipates BIDU should continue to outpace the underlying industry.
He found the risk-reward is substantially biased towards the upside, with the optionality of AD and AI cloud.
Price Action: BIDU shares traded higher by 0.39% at $95.45 on the last check Wednesday.

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