In reaction, the analyst shares a bullish forecast and key takeaways, reiterating a Buy rating on shares of BIDU with a $196 price target, which represents a 16% increase from current levels.
First, Jiang notes that BIDU anticipates the customer verification process for all categories to be finalized by the close of 2016, adding, “As such, core search growth will likely gradually recover going into 2017 with overall better sentiment, a higher quality customer base and company’s refocus on operation and acquiring new customers.”
Secondly, the leading Chinese language Internet search provider pointed to the news feed as “an emerging growth driver going forward,” which has been running at full speed growth as of its May launch when considering operating metrics from daily active users (DAU), notably hitting 70mm as of October, to user time spent to distributed content.
Thirdly, the analyst expresses, “Company indicated the O2O market continues to become more rational with user subsidies trending down, which should help to further ease the margin drag from the transaction business (majority contribution from Nuomi).”
“While the overall SG&A trend may fluctuate due to seasonal factors and investment discretion, company expects contained cost/ user subsidies from the O2O business. TAC cost will likely continue to trend up on the back of increasing contribution from mobile contextual ad. Content investment for iQiyi will likely remain aggressive going into 2017 given intensifying competition,” Jiang concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst Fawne Jiang is ranked #1,410 out of 4,274 analysts. Jiang has a 44% success rate and realizes 1.4% in annual returns. However, when recommending BIDU, Jiang loses 1.6% in average profits on the stock.
TipRanks analytics indicate BIDU as a Buy. Out of 8 analysts polled by TipRanks in the last 3 months, 50% are bullish on BIDU stock and 50% remain sidelined. With a return potential of nearly 15%, the stock’s consensus target price stands at $191.86.