Baidu Analysts Mostly Positive Heading Into Earnings; Mobile Search Monetization In Focus
Baidu Inc (ADR) (NASDAQ: BIDU) is scheduled to report its second quarter results after Monday's market close. The Estimize community (based on 62 estimates) is calling for the company to earn $1.85 per share on revenue of $2.629 billion. This compares to the Wall Street consensus estimate estimating the company to earn $1.80 per share on revenue of $2.580 billion.
Here is a summary of what Wall Street's top analysts are saying heading into the quarterly print.
Barclays: Recent Investments ‘Defensive,' ‘Reactive' And ‘Necessary'
Alicia Yap of Barclays commented in a note last week that Baidu is expected to report an in-line quarter, but will be paying attention for any third-quarter guidance and commentary on its SG&A spend and margin outlook.
Yap noted that Baidu's "stepped-up" promotional campaigns for Nuomi/020 business and incremental marketing investment from Qunar could result in additional SG&A expense and margin pressure. While these investments are "necessary" to provide a comprehensive local search function it is also "defensive" and "reactive."
Due to the higher spend and lower margin outlook, the analyst maintained an Overweight rating with a price target lowered to $240 from a previous $255.
UBS: Q2 A Recovery Following ‘Seasonally Weak' Q1
Erica Poon Werkun of UBS commented in a note in early July that Baidu is expected to show top-line growth in the first quarter after the seasonally weak first quarter.
Werkun said the company is expected to report revenue of Rmb16.46 billion (approximately $2.651 billion), marking a 37 percent year-over-year growth and 29 percent quarter-over-quarter growth. In addition, average revenue per user is expected to rebound to 20 percent growth in the quarter as the late timing of the New Year pushed some contract renewals into April.
Finally, the analyst is forecasting non-GAAP OPM to gain 7.9 percentage points quarter-over-quarter 27.1 percent due to operating leverage.
Werkun also listed seven key items for investors to focus on during the post earnings conference call: 1) updates on mobile search, 2) investment strategy and margin outlook, 3) investments in Nuomi, 4) use of proceeds from debt offerings, 5) possible spin-off of businesses, 6) smart hardware strategy, and 7) updates on M&A activity.
Shares remain Buy rated with an unchanged $248 price target.
BNP Paribas: What Baidu's Prospectus Says About Paid Clicks
Ver-Sern Ling of BNP Paribas commented in a note in late June that Baidu's prospectus filing for its debt offering suggested a decrease in paid clicks growth through the first quarter.
Ling noted that Baidu discloses paid clicks growth only in its annual report, but the company included the metric in its debt offering. Paid clicks grew 28.8 percent in the first quarter, marking a "sharp" drop from the 53.0 percent year-over-year growth in the first quarter 2014 when the company lost sold bonds.
The analyst added that despite the growth slowdown he remains "positive" on Baidu's medium-term growth and margin outlook.
Shares remain Buy rated with an unchanged $260 price target.
Summit Research: Concern Over Mobile Search ‘Not Warranted'
Henry Guo of Summit Research commented in a note in mid-June that investor concern of "limited improvement potential for its mobile monetization is "not warranted."
Guo said that recent checks indicate Baidu's core search business "remains solid' and believes SME strength and the "618" shopping day promotion will likely result in top-line "strength" in the second quarter.
The analyst also suggested that Baidu may disclose core search business financials during the second quarter conference call which could be seen as a "modest positive catalyst" to Baidu shares in the near-term.
Deutsche Bank: Focus On Disclosure
Alan Hellawell III also commented in a note last week that Baidu's management considered expanding its disclosure around the business to allow investors to "better distinguish between profitable, cash-cow arts of the business and loss-making growth investments in video and 020."
The analyst continued that investors should "welcome" the "improved" disclosure and offer the ability to perform a sum-of-the-parts valuation instead of a "simple" earnings based valuation. As such, the investment community will focus on management's commentary, but at the same time revenue guidance (and commentary on any strategic plans for Qunar and iQiyi) shouldn't be dismissed and also play a role in evaluating the company's stock price.
Shares remain Buy rated with an unchanged $236 price target.
Latest Ratings for BIDU
Jul 2015 | Bank of America | Maintains | Buy | |
Jun 2015 | Keybanc | Maintains | Overweight | |
Jun 2015 | Pacific Crest | Initiates Coverage on | Overweight |
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