With Worst Priced In, JPMogan Said It's Time to Buy Baidu (BIDU)

January 10, 2013 1:04 PM EST Send to a Friend
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Price: $234.23 +1.01%

Rating Summary:
    21 Buy, 1 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 14 | Down: 28 | New: 51
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Once a Wall Street darling, Baidu (NASDAQ: BIDU) has seen its star dim over the past few months as rival Qihoo 360 (NASDAQ: QIHU) has made some major inroads into the company's Chinese search monopoly. However, today shares of Baidu have reversed following positive commentary at JPMorgan.

JPMorgan analyst Dick Wei said with much of the negative sentiment already factored in to the share price, they see several key drives that will take the stock higher. Those drivers include: (1) good 4Q12 results, (2) improvement in ad spend with more positive macro economic outlook, (3) higher mobile monetization in 2013, and (4) stabilizing margins.

Wei expect higher ad spend to come through in 2Q13 and said 4Q12 results could have potential upside. "Company guides for flat sequential revenue growth in 4Q12, but from our checks, we believe revenue could see mid- to low-single digit growth," he said. "For full year 2013, we expect the street to revise up full-year revenue growth to closer to 40%."

According to Wei, it is time to buy the stock now as: (1) worst sentiment & lowest valuation in years – despite clarity in 30% CAGR earnings growth, (2) market share / barrier of entry / monetization remain high, (3) fundamental need for information doesn’t change on mobile, (4) Qihoo monetization rate to be low in ‘13.

The analyst also think integration of iQiyi creates longer-term value for Baidu.

Wei reitrated his Overweight rating and $170 price target on Baidu

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

Shares of Baidu last traded at $108.98, up 4.45%.


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