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G Sachs Drops BIDU-SW (09888.HK) TP to $177, Lowers 3Q Rev. Forecast
2023/10/19
Goldman Sachs issued a research report, lowering its revenue forecasts for BIDU-SW (09888.HK) & (BIDU.US) 's online marketing and AI cloud segments ahead of the company's 3Q results announcement in November.
The broker also revised its operating margin forecasts for BIDU to take into account delays in advertising budgets and weakness in enterprise and government cloud spending, while also reflecting incremental training and marketing spending on Ernie Foundation Model 4.0.
Goldman expected the market's recent focus on BIDU's slowing core growth and margins to overshadow the company's technological innovations, such as the launch of Ernie Foundation Model 4.0, as well as the progress of monetisation for the Foundation Model among consumers and businesses.
However, BIDU's 3Q performance was modest, and the broker believed the company would recover in 4Q with improvements in its advertising and cloud businesses.
Related News: CITIC Securities Projects BIDU-SW (09888.HK) 3Q Rev. to Grow 5%, Non-GAAP NP RMB6.1B
In the medium term, the broker believed BIDU has accumulated enough advanced GPUs for large language model (LLM) training, and that Ernie Foundation Model 4.0 is ready for commercialisation.
Goldman noted that BIDU's current price is equivalent to 12x 2023 forecasted P/E, with net cash-to-market capitalisation over 30%, and risk-reward profile remaining good.
The broker cut its 2023-2025 earnings forecast by 3% and its revenue forecast by 2% to 4% due to a downward revision of its revenue forecast and an increase in its investment in the Ernie Foundation Model.
Goldman Sachs lowered BIDU's H-share target price from HK$193 to HK$177, while its US-share target price was also trimmed from US$197 to US$181.
The broker maintained a Buy rating on BIDU and kept its on the Conviction Buy List.
Related News: BOCOMI Expects Baidu (BIDU.US) 3Q Core Rev. to Lift 5% YoY, Adj. OP at RMB5.9B
Source: AAStocks Financial News
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