Baidu (BIDU) Bullish Stance Reiterated at Maxim Group on Mobile Ops

Maxim Group analyst Echo He reiterated a Buy rating and $200 price target on Baidu (NASDAQ: BIDU) as yesterday’s meeting with BIDU’s management provided an in-depth look at BIDU’s mobile operations.

He notes Mobile app pre-installation may be expensive, but it’s necessary. "Management reaffirmed its strategy of continuing to support mobile app pre-installation—mainly BIDU search, BIDU map, BIDU mobile assistant, and BIDU security—on 80% of branded Android smart phones (which have more than an 80% share in China) in the foreseeable future. Management believes it is important to build the brand and user habits among new smart phone users in order to enforce its market dominance in the long term. As a result, BIDU may have to spend ~$400M in 2014 and increasingly more thereafter on pre-installation. This expense is one of the contributors to margin pressure in the next few years."

The analyst also notes UCWeb (private) may be significant to BIDU’s mobile traffic, but it’s most likely immaterial to BIDU’s revenues. Management disclosed that ~50% of mobile search traffic was internally generated, according to He.

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 $156.11 yesterday.

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