Baidu's ChatGPT Product To Help Close Valuation Gap With Google, Analyst Says Post Investor Call

Mizuho analyst James Lee reiterates Baidu Inc BIDU with a Buy and a $190 price target.
Lee recently hosted an investor call with management and said Baidu has several idiosyncratic drivers beyond China's expected macro recovery.
Baidu's first Generative AI product, Ernie Bot, is one of many applications to be introduced in the foreseeable future that could expand the market size of search, attract new users, and increase user engagement. The reception by the industry was strong, the analyst said.
The company's first-mover advantage should alleviate the negative perception of search being disintermediated in China and enable Baidu to close the valuation gap with Alphabet Inc GOOG GOOGL Google.
As business travel starts to normalize, he expects Baidu to resume its double-digit growth path while gaining share with traditional industries undergoing digital transformation.
With a mandate of 70% of new cars to have ADAS features and economies of scale over its peers, he believes Baidu is well-positioned to capture a disproportionate share of OEM licensing opportunities.
The analyst anticipates BIDU to remain laser-focused on margins. For advertising, the company plans to maintain high margins. For AI Cloud, BIDU could reach profitability in 1-2 years (shortened from about 3 years) as the company benefits from the multiple tailwinds.
For Autonomous Driving, losses to remain stable due to rational competition. Lastly, the analyst anticipates Baidu to invest in Generative AI.
Still, capex can be amortized over a few years, so savings from increased efficiency in other businesses should more than offset incremental costs.
Lee maintains Baidu as a top pick, seeing multiple company-specific drivers like Generative AI, cloud, and ADAS that could drive considerable expansion.
Price Action: BIDU shares traded lower by 1.19% at $137.34 on the last check Tuesday.

Market News and Data brought to you by Benzinga APIs

Comments

Analyst Calendar

Popular Channels

Tools & Features

Partners & Contributors

About Benzinga