Baidu Shares Downgraded Amid Concerns Over Search Disruption

Baidu downgraded at Bernstein amid worries over search (BIDU)

Baidu (NASDAQ:BIDU) was in the spotlight on Friday as Bernstein downgraded the Chinese tech company on worries over its search business. Shares were down 2% in premarket trading. With the search business in transition and less visibility into the future, the stock is likely to trade sideways for some time, analyst Boris Van wrote in an investor note. Van lowered his rating on Baidu to Market Perform from Outperform and cut his price target to $97 from $130. As such, Van lowered his estimate for search growth by five percentage points for the second-half of 2024 and three percentage points in 2025. As of now, there is no value to the company's AI-related search initiatives. Separately, while the company's robotaxi and artificial intelligence cloud initiatives are both positive, without any revival in search, it's likely that Baidu shares will remain under pressure, Van added. Analysts are largely bullish on Baidu (BIDU). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a STRONG BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates BIDU a HOLD. More on Baidu Baidu, Inc. (BIDU) Q2 2024 Earnings Call Transcript Baidu: Buy It Before Earnings Baidu: Historical Support At $80 Baidu dips after sales miss as online marketing revenue falls; AI search in transition Baidu Non-GAAP EPADS of $2.89 beats by $0.29, revenue of $4.67B misses by $70M

Baidu shares downgraded on search disruption concerns By Investing.com

On Friday, Bernstein SocGen Group issued a downgrade for Baidu (NASDAQ:BIDU) shares, moving its rating from Outperform to Market Perform. Alongside the downgrade, the firm also reduced the price target to $97.00 from the previous $130.00. The downgrade was prompted by expectations of increased disruption in the search segment and a lack of clear indicators of future success. The analyst noted that the near-term search results could face more disturbances, which might obscure the company's long-term prospects. Consequently, the growth forecast for Baidu's Search has been lowered by 5 percentage points in the second half of 2024 and by 3 percentage points in 2025. The firm's cautious stance is also reflected in the valuation of Baidu's stock, which is now based on a bear case scenario. The new valuation does not attribute any worth to Baidu's AI Search initiatives for the time being. Despite recognizing the positive aspects of Baidu's AI Cloud and Robotaxi ventures, the analyst believes that without a resurgence in the Search business, the company's shares are likely to face ongoing pressure. The revised stock price target of $97.00 represents a significant decrease from the previous target, indicating a more conservative outlook on the company's performance. The analyst's comments suggest that until there is a visible recovery in the Search sector, Baidu's stock may not appeal to investors seeking growth. This adjustment in the stock's rating and price target reflects the analyst's anticipation that Baidu's shares will not see significant movement in the near term. The company's future performance in the search domain appears to be a critical factor for its stock valuation and investor sentiment. In light of Bernstein SocGen Group's recent downgrade of Baidu (NASDAQ:BIDU), real-time data from InvestingPro provides additional context. Baidu's adjusted market capitalization stands at $30.08 billion, reflecting its significant presence in the market. The company's price-to-earnings (P/E) ratio has been reported at 11.84, with an adjusted P/E ratio for the last twelve months as of Q2 2024 at a slightly lower 10.74. This suggests a potentially undervalued stock, especially when considering the company's PEG ratio of 0.28 during the same period, which indicates potential for growth relative to earnings expectations. InvestingPro Tips highlight that Baidu's price/book ratio as of Q2 2024 is 0.85, which could attract value investors looking for stocks trading below their book value. Moreover, the company's revenue growth has been modest at 3.08% over the last twelve months as of Q2 2024, signaling steady, albeit slow, top-line expansion. These metrics, alongside a gross profit margin of 51.5%, suggest that Baidu maintains a strong ability to convert revenue into gross profit. For those interested in exploring Baidu's financial health and investment potential further, InvestingPro offers numerous additional tips. As of the latest update, there are 15 more InvestingPro Tips available, providing deeper insights into Baidu's financials, market performance, and future outlook. These tips could be particularly valuable for investors weighing the recent analyst downgrade against Baidu's fundamental financial health.