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BIDU to grow revenue 60% in 2011 and 45% in 2012 because of Phoenix Nest

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 Baidu: Piper Upgrades After Strong Q3 Earnings; Boosts Target

  • October 22, 2010, 9:33 AM ET
By Eric Savitz

Piper Jaffray analyst Gene Munster this morning raised his rating on Baidu (BIDU) to Overweight from Neutral, lifting his target on the stock to $139, from $81. The move follows the China-based search engine company’s stronger-than-expected Q3 earnings reports yesterday after the close.

“We believe the impact from the transition to Phoenix Nest” - the company’s online ad platform - “will remain significant over the next two years, enabling the company to grow revenue 60% in 2011 and 45% in 2012,” he writes in a research note. “Given these expected growth rates, we believe shares are undervalued.”

Munster lifted his 2010 EPS forecast to $1.49 from $1.36; for 2011, he goes to $2.44, from $2.02.

BIDU is up $4.37, or 4.3%, to $106.85.



Fri Oct 22, 2010 9:38am EDT

* See Baidu benefiting from customer ads, Phoenix nest

* Lower traffic acquisition costs help drive margins

* Shares up 6 pct, touch a year high

Oct 22 (Reuters) - At least three brokerages raised their price targets on China's biggest search company Baidu (BIDU.O) to as much as $130, implying a 27 percent gain from current levels, a day after the company's strong quarterly numbers and outlook.

Baidu's results and revenue forecasts beat expectations after it increased its Web traffic and customers at the expense of rival Google Inc (GOOG.O). [ID:nN21118741]

Baidu will continue to benefit from the strong China online ad market, share gains from Google's retreat from mainland China and Baidu's ad program Phoenix Nest, Kaufman Bros analyst Mayuresh Masurekar said in a note.

Increase in eCommerce ad spend on search and launch of a contextual platform within the next two to three quarters could lead to further upside, Masurekar, said reiterating his "buy" on the stock.

"The company's guidance is supported by 15 percent sequential growth in customer deposit on its balance sheet," Susquehanna analyst C Ming Zhao said, raising his price target on the stock $25 to $125.

In the third quarter, Baidu's active online marketing customers rose 26 percent to 272,000, while revenue per customer reached RMB 8300, up 41 percent, Zhao said.

Lower traffic acquisition costs (NYSE:TAC) helped drive gross margins for Baidu. TAC fell 80 basis points sequentially, benefiting from faster organic traffic growth during the quarter. "As such, gross margin expanded 160 bps sequentially in the third quarter," Think Equity analyst Aaron Kessler said.

Kessler raised his price target on the stock to $130 from $115. Separately, RBC upped its price target to $111 from $102.

Baidu's shares, which have more than doubled in the last 52 weeks, touched a year high of $108.48 in early trade Friday on Nasdaq. (Reporting by Mansi Dutta in Bangalore; Editing by Prem Udayabhanu)