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Brean Upgrades Baidu To Buy, Sets $235 Price Target

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Baidu Inc (ADR) BIDU reported Q1 results with revenue in-line with the consensus and the EPS ahead of expectations. The company also announced robust Q2 guidance.

Brean Capital’s Fawne Jiang upgraded the rating on the company from Hold to Buy, with a $235 price target.

“With BIDU continuing to divest loss-making assets, core search margin stable, and O2O promotion having potentially peaked, we expect improving earnings visibility in the coming quarters,” Jiang mentioned.

1Q16 Results

Although Baidu reported its revenue for the quarter in-line with the consensus, Jiang pointed out the sequential decline during Q1 was primarily driven by a quarter-on-quarter ARPU decline, partially offset by an increase in advertiser growth.

Both the non-GAAP EPS and non-GAAP operating margin came in above the consensus expectations.

“Core search continued to grow, primarily driven by improving search monetization,” Jiang stated, adding that mobile contributed 60 percent of the total revenue for 1Q.

Baidu continued to enhance its mobile reach during 1Q16, while also investing in improving the search experience through more personalized and targeted search results and an improved search interface.

“BIDU continued to ramp up its Local express services, with ~200K merchants launching the Local express accounts as of 1Q, covering different verticals,” the analyst added.

2Q Guidance

The 2Q16 guidance was robust, with the revenue guidance of RMB 20.11-20.58 billion reflecting 21.3-24.2 percent year on year growth.

The low end of the guidance was in-line with the consensus forecast.

Apr 2016Brean CapitalUpgradesHoldBuy
Apr 2016JefferiesMaintainsBuy
Mar 2016Summit ResearchTerminatesBuy

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