BofA Lifts Baidu Estimates On Ad Recovery

Baidu Inc’s BIDU ad business appears to be in a gradual recovery mode, driven by a higher proportion of in-app sales, according to BofA Securities.

The Baidu Analyst: Eddie Leung maintained a Buy rating on Baidu and raised the price target from $175 to $195.

The Baidu Thesis: Although travel, online finance and property ads remain under pressure, there has been a rebound in ad spending in the health care, education, auto, lifestyle and software industries, Leung said in a note.

The Mobile Baidu app, which now accounts for more than 50% of ad sales, is a driver of core sales growth “thanks to double-digit traffic growth and more video ads that lift the average eCPM,” the analyst said. 

“New initiatives are still in an investment stage. Cloud and AD (autonomous driving) are adding use cases such as bank clients and gov’t initiatives in smart transportation and robot taxis,” he said. 

BofA raised the earnings estimate for 2020 from $36.50 per share to $67.83 per share to reflect higher gains and margins, and the estimates for 2021 and 2022 from $52.85 per share to $60.11 per share and from $56.85 per share to $65.96 per share, respectively, to reflect streaming sales and ad recovery.

BIDU Price Action: Shares of Baidu were down 2.08% at $133.28 at last check Monday.