Maxim Group Maintains Bullish View on Baidu (BIDU) Post Q4

February 27, 2014 8:34 AM EST Send to a Friend
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Maxim Group analyst Echo He reiterated a Buy rating and $200 price target on Baidu (NASDAQ: BIDU) following Q4 results noting mobile revenue contribution up to 20% and price is once again leading growth.

On the quarter and outlook, He commented: "Gross revenue was $1.57B, 2% above our estimate and 3% higher than consensus. GAAP EPS was $1.30, eight cents below our estimate and six cents below consensus. Gross margin declined to 66.5% from 70.5% in 3Q13 - all cost items increased q/q as a percentage of revenue. Operating margin was 31%, significantly decreased from the 40.5% in 3Q13 due to SG&A and R&D expenses increasing to 21.1% and 14.3% of net revenue, respectively, from 16.8% and 13.2% in 3Q13. That said, BIDU's 1Q14 revenue guidance, $1.53B-$1.57B, was 7% higher than our estimate and 9% above consensus, suggesting accelerating y/y growth and less-than-expected seasonality impact in the first quarter."

The analyst also noted that the company announced that mobile revenue (majority from search plus some from game) exceeded 20% of total revenue, up from the 10% BIDU reported in April 2013. "We believe the significant increase of mobile ad contribution is a combined result of increasing advertisers' demand for mobile ads and increasing minimum mobile bids required by BIDU's bidding system," the analyst said.

He said price increase will likely become the main growth driver going forward and is comfortable with BIDU's growth prospects but concerned with BIDU's declining margins and PC query share.

For an analyst ratings summary and ratings history on Baidu click here. For more ratings news on Baidu click here.

Shares of Baidu closed at $172.90 yesterday.


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