Bernstein Starts Baidu (BIDU) at Underperform

Bernstein initiates coverage on Baidu (NASDAQ: BIDU) with a Underperform rating and a price target of $150.00.

Analyst Bhavtosh Vajpayee comments "Baidu's core search business is slowing, and will likely lose up to 5ppts of digital ad share in the coming three years. Video is an area of growth, but Baidu is currently in a three-way battle with Alibaba and Tencent. Artificial intelligence is a space where the company has made impressive early moves, but monetization is still some years away. The most exciting event ahead for Baidu's shareholders is a retrenchment in the distracting O2O business, which has wrecked the profitability of the company as a whole, impinged on its resources to win the video war, and seems to suffer from a structural question on normalized profits. While cutting back in the O2O business can create a significant pop in the stock, our Underperform recommendation is based on what Baidu is, not what it could be. We do think, however, that Baidu would be well served by a return to its roots in core tech, where it has undeniable strengths — and a shift away from lifestyle services (O2O), where the gap with the dominant player has expanded, and which seems a battle it cannot possibly win."

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 $180.31 yesterday.

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