- Mizuho analyst James Lee maintained Baidu Inc (NASDAQ: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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