Baidu (BIDU) May See Further Margin Deterioration - Analyst

April 26, 2013 10:25 AM EDT
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Price: $176.96 +0.27%

Rating Summary:
    17 Buy, 12 Hold, 4 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 35 | Down: 31 | New: 11
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Goldman Sachs today maintained a Neutral rating on Baidu (NASDAQ: BIDU) with a price target of $89.00. Yesterday Baidu reported disappointing Q2 results driven by margin weakness, leading to a sell-off in the stock. Commenting on Baidu's performance, analyst Piyush Mubayi said he expects margin weakness to continue during the company's the transitional phase.

"The near-term revenues are unlikely to surprise positively, in our view, as mobile monetization is distant, macro conditions do not warrant aggressive pricing inflation, and online video is competitive," said Mubayi. "For the transition phase, we model further margin deterioration on rising SG&A (+2.8 pp yoy) and traffic acquisition costs (TAC; +2.4 pp) resulting in an operating margin of 39% for 2013 (50.5% for 2012)."

Mubayi isn't overly confident in Baidu's positioning, and would rather own shares of Tencent.

For an analyst ratings summary and ratings history on Baidu (NASDAQ: BIDU) click here. For more ratings news on Baidu click here.

Shares of Baidu closed at $92.34 yesterday.

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