Piper Jaffray Says Chinese Ad Market Will Remain Challenging (BIDU, SOHU, SINA)

Analysts at Piper Jaffray, including Gene Munster, issued a research note today considering the impacts of a slowing Chinese ad environment on local websites such as Baidu.com (Nasdaq: BIDU), SINA (Nasdaq: SINA) and Sohu.com (Nasdaq: SOHU). The note follows Chinese website traffic data which was published by China Website Ranking yesterday.

The firm believes that, despite traffic levels that have stayed healthy, the macro environment will remain challenging. Piper sees mixed results and guidance for its coverage universe and said it would stay "cautious on the advertiser side..."

• Baidu - maintains Buy and $180 price target. Data suggests Baidu's traffic trend was flat sequentially in Q4. "Given the late in the quarter removal of unlicensed listings..." Piper believes the Street's estimates for Baidu's margins could turn out to be conservative. The firm is currently expecting Q4 EPS of $1.26, below the Street's estimate of $1.39. For the first month of its Q1, Baidu's traffic appears to be flat to up. The firm notes that the Street is currently modeling for Q1 sales to be down 10% sequentially, but Piper believes the company could guide below given "the overall macro environment and timing of the Chinese New Year..."
  
• SINA - maintains Buy and $34 price target. Q4 traffic was flat; Piper is expecting an 8% decline q/q in advertising sales, with EPS in-line with the Street's estimate of $0.45. For Q1, the firm sees SINA reporting sales down 12% q/q.
  
• Sohu - maintains Buy and $54 price target - flat Q4 sales with a 9% decline q/q in advertising revenue. Sees Q1 ad revenue down 6% q/q.

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