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Why Credit Suisse Is Changing Baidu and Alibaba Upside Targets Handily

It is more common than many investors might guess, but analysts often change roles within firms or they go to other firms. Credit Suisse has two new notes out on July 21, with an analyst assuming coverage of both Baidu Inc. (NASDAQ: BIDU) and Alibaba Group Holding Ltd. (NYSE: BABA). Both ratings are positive, but the price target changes in the new coverage are in different directions.

Credit Suisse is still calling for handy upside in both companies. Evan Zhou and Angela Zhou assumed coverage on Baidu and gave a $190 price target, which is actually lower than the prior $245 call from Credit Suisse. Evan Zhou and Monica Chen assumed coverage on Alibaba with an Outperform rating, but the $114 price target compares to a prior target of $100.

Baidu’s Outperform rating has a sum-of-the-parts target of $190, despite challenges in its core search slowdown. Credit Suisse noted that the extent and length of any impact may not yet be fully reflected in street estimates. New initiatives like artificial intelligence, driverless cars and deep-learning may not materialize into earnings in the coming two years. Still, Credit Suisse sees Baidu delivering normalized growth in core search and expects Baidu to keep unlocking value from takeout delivery, Nuomi and iQiyi.

The core statement here is that Credit Suisse sees limited near-term catalysts in Baidu, so its Outperform rating comes with the...