Barclays Upgrades Baidu On 'Substantial Upside'

Baidu Inc’s BIDU online marketing services and artificial intelligence initiatives are reaching an inflection point, according to Barclays.

The Baidu Analyst: Gregory Zhao upgraded Baidu from Equal Weight to Overweight and raised the price target from $140 to $170.

The Baidu Thesis: Since the second quarter this year, the company’s marketing division, which contributes around 85% of core revenues, has recovered in-line with the online ad industry, gradually restoring growth momentum, Zhao said in the upgrade note.

“Thanks to the consistent efforts on building up the “super app” ecosystem in the Baidu Mobile app, the 2Q20 in-app search queries and revenues grew 28% and double digits y/y, respectively. And the strategic pulling-back from the low margin TAC revenues helps enhance Baidu Core’s margin expansion,” the analyst said. 

Baidu’s AI-backed Cloud, XiaoDu smart speaker and autonomous driving are “starting to deliver,” he said. 

“We also see substantial upside in the potential monetization through membership, gaming and live streaming to fully utilize existing traffic.”  

BIDU Price Action: Baidu shares were up 4.69% at $140.40 at last check Wednesday.