Baidu And Will Gain Market Share Amid Regulatory And Macro Headwinds, Analyst Says

  • Mizuho analyst James Lee expects the recovery curve in 2H22 to slow for China Internet, given the rising COVID cases and mobility restrictions impacting consumer sentiment and business activities. 
  • The headwind would reflect across all internet segments, including e-commerce, advertising, and cloud computing. 
  • Although the economy should recover from the 2Q22 trough, a potential moderation to the Zero-COVID policy would improve the speed of recovery and investor sentiment. 
  • With the conclusion of the 20th National Congress, Lee expects a focus on consumption support for strategic industries with a gradual exit from Zero-COVID.
  • Lee maintained, Inc JD and Baidu, Inc BIDU as top picks. Lee anticipated both companies to be market-share gainers from regulatory policies and the competitive environment. 
  • Lee maintained Buy on Baidu cutting the price target from $275 to $200.
  • Lee reiterated Buy on, slashing the price target from $90 to $82.
  • The price target cuts reflected macro headwinds and compression of group multiples.
  • Price Action: JD shares traded higher by 3.96% at $50.87 on the last check Monday. BIDU shares traded higher by 3.21% at $92.33.
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