On Thursday, Nomura/Instinet maintained a positive stance on Baidu (NASDAQ:BIDU), reiterating a Buy rating and a $110.00 price target for the company's stock. The endorsement follows Baidu's annual AI event, Baidu World, which took place on November 12, where the company presented significant advancements in artificial intelligence technology.
During the event, Baidu showcased two major breakthroughs in AI. The first is an image-based retrieval-augmented generation (IRAG) technology that addresses the 'hallucination problem' commonly encountered in image generation by large models.
The second highlight is the introduction of MiaoDa, a new programming tool that allows users to create complete systems through natural language interactions, simplifying the process of application development.
Baidu also provided updates on its flagship large language model, Ernie Bot. According to the company's management, Ernie Bot's average daily calls have surged to over 1.5 billion, a significant increase from the 200 million reported in May. The model has seen substantial enhancements in core capabilities, including code generation, code interpretation, and code optimization.
The company's progress in AI technology and the updates on Ernie Bot's performance and capabilities underscore the reasons behind Nomura/Instinet's continued confidence in Baidu's stock. With the reaffirmed Buy rating and $110.00 price target, investors are given a clear perspective on the firm's valuation of Baidu's market potential.
In other recent news, Baidu has been subject to various revisions by financial firms. CLSA reduced its price target for Baidu to $120, citing challenges due to macroeconomic conditions and the transition to AI Search. Despite a projected decline in Baidu's core revenue and adjusted EBIT, the firm still maintained an Outperform rating.
On the other hand, US Tiger Securities, Jefferies, Loop Capital, and Citi have maintained their Buy ratings for Baidu, despite adjusting their price targets downward due to a weaker macroeconomic environment in China.
HSBC downgraded Baidu's stock from Buy to Hold, citing updated beta and currency estimates, increased competition, and a weaker advertising outlook. In contrast, Citi maintained its Buy rating and $144.00 stock price target for Baidu, noting the recent management changes at the company as potentially beneficial for long-term growth.
Baidu reported an 8% year-over-year growth in non-GAAP operating profit and a total revenue from Baidu Core of RMB 26.7 billion in its Q2 2024 earnings report. The company's AI Cloud business is projected to maintain its double-digit growth trajectory, expected to increase by 16% in the third quarter. These are the recent developments for Baidu.
InvestingPro Insights
Baidu's recent AI advancements, as highlighted in the article, are reflected in its financial metrics and market positioning. According to InvestingPro data, Baidu's market cap stands at $29.62 billion, with a P/E ratio of 11.02, suggesting the stock may be undervalued relative to its earnings. This is further supported by the company's price-to-book ratio of 0.85, indicating that the stock is trading below its book value.
Despite the recent technological breakthroughs, Baidu's revenue growth has been modest, with a 3.08% increase over the last twelve months as of Q2 2024. However, the company maintains a strong gross profit margin of 51.5%, demonstrating its ability to efficiently convert revenue into profit.
InvestingPro Tips highlight that Baidu's stock price is significantly below both its 52-week high and the fair value estimated by analysts. With the stock trading at 66.91% of its 52-week high and analysts setting a fair value of $123.7, there could be potential upside for investors if the market recognizes the value of Baidu's AI innovations.
For those interested in a deeper analysis, InvestingPro offers 16 additional tips for Baidu, providing a comprehensive view of the company's financial health and market position.
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