Credit Suisse has published a research report on Baidu.com BIDU after the company reported 4Q results in-line with declining operating margins.
In the report, Credit Suisse writes, "Baidu has increased its network infrastructure capacity. Bandwidth costs and depreciation as % of total gross revenue increased to 4.3% and 4.8% from 4% in 4Q10, respectively. Management indicated spending on bandwidth and servers will continue in 2012 due to personalised homepage, cloud computing and other new areas. Traffic Acquisition Cost (TAC) % was down from 8.0% in 3Q to 7.9% in 4Q. But, management expects TAC % to increase in 2012, as Baidu is driving the growth of contextual advertising. We expect TAC to increase from 8.0% in 2011 to 8.6% in 2012. Separately, SG&A expenses were 13% above our forecast."
Credit Suisse maintains its Neutral rating and has raised the price target on from $134.50 to $138 on Baidu.com, which closed yesterday at $141.83.
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