By Angus Robertson
Chinese Internet company Baidu (BIDU) continues to impress analysts with its solid growth, allaying fears that the stock is overheating. Baidu has tripled since Google (GOOG) effectively abandoned the Chinese market in early 2010.
Brean Murray initiated coverage of Baidu wth a Buy rating and a target of $170. The broker cites strong 2Q guidance suggesting robust momentum of the Phoenix Nest platform as it hits its anniversary.
Most bullish is Jefferies analyst Cynthia Meng who initiated coverage earlier this month with a Buy rating and $200 target, about a third higher than current levels. Baidu enjoys high barriers to entry, limited competition, a growing market with still-low online market -penetration among small and medium-sized enterprises and an early opportunity in mobile search, Meng wrote.
Think Equity analyst Aaron Kessler maintained a Buy rating and $175 price target on the stock, touting the margin expansion, strong business momentum and above-consensus second quarter guidance. However, consumer adds were below his estimates, Barron's Tech Trader Daily reports.
Stifel Nicolaus analyst George Askew raised his price target to $172 from $144 on the earnings, noting that active online marketing customers and revenue per customer drove growth.
China International Capital analyst Jin Yi maintained a Buy rating and raised Baidu.com's price target to $160 from $142. "We expect Baidu to maintain its leading position in PC search, gain momentum in mobile search, and capitalize on China's e-commerce and online video growth ... Baidu remains one of our top picks."
Morgan Stanley analyst Richard Ji and his team maintained their equal weight rating and $150 price target on the stock, noting that they liked the increase in paying customers, growing second quarter sales and Baidu's new initiatives. However, they were concerned with accelerating bandwidth costs, Barron's adds.
Hong Kong-based JPMorgan analyst Dick Wei said Baidu looked well-positioned in the social media landscape, with plans to improve its search function for microblogging.
"The Street is expecting around a 60 percent growth year-on-year, which I think is reasonable given the long term potential for Baidu and search in China," he told Reuters.
JPMorgan raised its target from $125 to $190, and maintained an Outperform rating. Other price target changes included: Goldman Sachs from $145 to $160 and Citigroup from $135 to $177. Long-time bear Wallace Cheung at Credit Suisse reiterated his Underperform rating while raising his price target from $99 to $107.
"The growth rate will not be as fast as last year," said Muzhi Li, an analyst at Mizuho Securities in Hong Kong. Baidu's revenue will be helped by advertising spending by online commerce companies, he told Bloomberg.
Robin Li, Baidu's chief executive officer, concedes the point, saying growth rates would likely slow compared to last year, when it was boosted by its fledgling keyword advertising system, Phoenix Nest.
"This year, I think it would be a more normal sequential growth," he told analysts on a conference call.
Sources: Alacra Pulse, Barron's Tech Trader Daily, Investors Business Daily, Reuters, Bloomberg, China Analyst, Minyanville.