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Baidu: Hello to $305 & Adieu to the Rest!

Barclays kept its Baidu stock rating at equal weight and cut its price target to $240 from $250. J.P. Morgan kept its rating at neutral and cut its target to $225 from $230. But weak fourth quarter 2017 guidance "provides a good entry point," writes Macquarie Group Analyst Wendy Huang, who considers the stock a top pick in the China internet space. Huang is keen on Baidu's artificial intelligence strategy, and has an outperform rating on the stock and a $305 price target.

Net profit in the quarter beat consensus by 107% due to a one-time gain from the disposal of the O2O business. Excluding one-time items, non-GAAP net profit was still higher than consensus by 1.2%, Huang notes. She adds:

"Weak fourth quarter 2017 guidance is mainly due to the deconsolidation of food delivery and soft iQiyi revenue, while the guidance on core business is still strong at 28-34% year-on-year growth driven by a recovery in search and strong news feed monetization ..."

The Guggenheim China Technology exchange-traded fund (CQQQ) was up 1.8% in recent trading, and the iShares China Large-Cap ETF (FXI) was up 0.2%.

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