Re: Baidu (BIDU)
Posted: Tue May 05, 2015 8:16 pm
not vested
May 3, 2015
Why Jefferies And CICC Downgraded Baidu By Shuli Ren
I would characterize Baidu‘s (BIDU) March quarter earnings as a non-event.
Baidu’s revenue rose 34%, missing slightly consensus estimates, but its net income slightly beat.
Baidu’s management expects revenue in the second quarter to rise by 38% (at midpoint), just shy of the 39% consensus estimate. The company expects to continue investing aggressively in new growth areas such as offline-to-online (O2O) initiatives.
But investors were losing patience, sending the shares down 8.6% on Thursday after the earnings. Baidu recovered only 1.1% on Friday. After all, Baidu’s core search business is slowing down.
What are the Wall Street analysts saying? After flipping through half a dozen reports this morning, I find Jefferies most interesting.
Analyst Cynthia Meng, Karen Chan and Shawn Zhou downgraded this stock to Hold with a new $196 price target. Baidu closed at $202.47 on Friday.
Baidu is betting on O2O as a new growth engine. But the fact that it does not own a viable mobile payment solution limits its ability to monetize on O2O, wrote the analysts:
Despite recurring investment, closing the loop of O2O transactions and driving monetization will prove challenging for Baidu without a strong payment tool, in our view. Baidu Wallet currently only has 26mn connected accounts, compared to 119mn Weixin Payment MAU and 190mn Alipay MAU.
Based on our channel checks, local SME merchants on Baidu Connect are not typical keyword search bidders. Public subscription accounts on Weixin and Alibaba, as well as local lifestyle service platforms such as Dianping and Meituan are better positioned to capture users and advertising growth in this respect.
In addition, we view Tencent public subscription accounts and Alipay public accounts (under service window tab) as potential strong competitors to Baidu in O2O.
Tencent Holdings (700.HK/TCEHY) and Alibaba Group (BABA) dominate China’s mobile e-payment market.
Meanwhile, CICC‘s Haofei Chen and Yue Wu also downgraded Baidu to Hold, saying that Baidu can no longer benefit from fierce competition among online verticals. For instance, last month, China’s Craigslist 58.com (WUBA) merged with competitor Ganji. The new merged company “clearly stated that they will cut their sales & marketing expenses”, a large part being online advertising dollars to Baidu. CICC’s analysts also mentioned that Baidu’s “O2O transformation is not running smoothly.”
Elsewhere, we have Nomura Securities tweaking down their price target from $243 to $240, Deutsche Bank tweaking down from $245 to $239, and Piper Jefferies from $231 to $230, all non-events.
Source: Barron's Asia
May 3, 2015
Why Jefferies And CICC Downgraded Baidu By Shuli Ren
I would characterize Baidu‘s (BIDU) March quarter earnings as a non-event.
Baidu’s revenue rose 34%, missing slightly consensus estimates, but its net income slightly beat.
Baidu’s management expects revenue in the second quarter to rise by 38% (at midpoint), just shy of the 39% consensus estimate. The company expects to continue investing aggressively in new growth areas such as offline-to-online (O2O) initiatives.
But investors were losing patience, sending the shares down 8.6% on Thursday after the earnings. Baidu recovered only 1.1% on Friday. After all, Baidu’s core search business is slowing down.
What are the Wall Street analysts saying? After flipping through half a dozen reports this morning, I find Jefferies most interesting.
Analyst Cynthia Meng, Karen Chan and Shawn Zhou downgraded this stock to Hold with a new $196 price target. Baidu closed at $202.47 on Friday.
Baidu is betting on O2O as a new growth engine. But the fact that it does not own a viable mobile payment solution limits its ability to monetize on O2O, wrote the analysts:
Despite recurring investment, closing the loop of O2O transactions and driving monetization will prove challenging for Baidu without a strong payment tool, in our view. Baidu Wallet currently only has 26mn connected accounts, compared to 119mn Weixin Payment MAU and 190mn Alipay MAU.
Based on our channel checks, local SME merchants on Baidu Connect are not typical keyword search bidders. Public subscription accounts on Weixin and Alibaba, as well as local lifestyle service platforms such as Dianping and Meituan are better positioned to capture users and advertising growth in this respect.
In addition, we view Tencent public subscription accounts and Alipay public accounts (under service window tab) as potential strong competitors to Baidu in O2O.
Tencent Holdings (700.HK/TCEHY) and Alibaba Group (BABA) dominate China’s mobile e-payment market.
Meanwhile, CICC‘s Haofei Chen and Yue Wu also downgraded Baidu to Hold, saying that Baidu can no longer benefit from fierce competition among online verticals. For instance, last month, China’s Craigslist 58.com (WUBA) merged with competitor Ganji. The new merged company “clearly stated that they will cut their sales & marketing expenses”, a large part being online advertising dollars to Baidu. CICC’s analysts also mentioned that Baidu’s “O2O transformation is not running smoothly.”
Elsewhere, we have Nomura Securities tweaking down their price target from $243 to $240, Deutsche Bank tweaking down from $245 to $239, and Piper Jefferies from $231 to $230, all non-events.
Source: Barron's Asia