Oppenheimer analyst Jason Helfstein is chiming in with a bullish perspective on Baidu Inc (ADR) (NASDAQ:BIDU) despite fourth-quarter results that less than impressed last Thursday. Anticipating growth to make a resurgence by the second quarter of this year, the analyst reiterates an Outperform rating on shares of BIDU with a $200 price target, which represents a 15% increase from where the stock is currently trading.
For the fourth quarter, gross revenue fell 1% under consensus, with the analyst assessing a “[…] lag in core search advertising customers […]” with GP missing expectations also by 1% on back of a surge in content costs, which rose 7% ahead of expectations. Top-line guidance for the second quarter also underperformed by 2%. Subsequently, the analyst has raised 2017 net revenue projections 4% on NewsFeed while pulling back on EBITDA by 5% and has boosted net revenue estimates 4% for 2018 while cutting EBITDA by 6%.
Though the analyst acknowledges both fourth-quarter earnings as well as first quarter guidance for 2017 hit “modestly below expectations,” he continues to be confident on BIDU’s prospects, underscoring, “1) near completion of ICP registrations, 2) core Search bottoming out, 3) strong NewsFeed adoption, and 4) increased valuation of iQiyi/CTRP. Net revenue 1% above on Search/iQiyi, partially offset by slower ‘Locals.’ […] 1Q:17 revenue guided slightly below Street on ‘conservative’ Search recovery & NewsFeed ramp (CPC ~50% of Search). Mgmt emphasized commitment to long-term strategic areas (content & AI), with R&D skewing toward AI, particularly for financial/Cloud/self-driving applications. As BIDU appears to have gone through the worst of the re-regulation of advertisers, the stock should see increased investor sentiment.”
Overall, “As BIDU’s advertiser verification has completed, investor sentiment should improve, underpinned by the senior mgmt change. Search reacceleration should be near-term catalyst, while still pursuing Local spin-off,” Helfstein concludes.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Jason Helfstein is ranked #313 out of 4,501 analysts. Helfstein has a 58% success rate and garners 8.5% in his yearly returns. When recommending BIDU, Helfstein gains 11.9% in average profits on the stock.
TipRanks analytics exhibit BIDU as a Buy. Out of 11 analysts polled by TipRanks in the last 3 months, 5 are bullish on Baidu, 5 maintain a Hold, while 1 issues a Sell. With a return potential of nearly 8%, the stock’s consensus target price stands at $189.80.