Monday, Benchmark cut its price target for Baidu (NASDAQ:BIDU) shares from $210 to $180, while still maintaining a Buy rating on the stock. The adjustment comes ahead of Baidu's first-quarter earnings report, scheduled for May 16, 2024.
The firm's decision is based on preliminary advertising checks indicating a subdued spending environment among small and medium-sized enterprises (SMEs) and offline advertisers during a traditionally low season, exacerbated by macroeconomic factors and holiday disruptions. These findings have prompted Benchmark to lower its year-over-year core advertising growth projection for Baidu from 4.6% to 1.7%.
In response to the slower-than-expected start to the year, Benchmark has taken a conservative stance, revising downward its full-year 2024 revenue and earnings estimates for Baidu.
The new forecast anticipates a 4% year-over-year growth in advertising, reduced from the previous 6% expectation. However, the firm maintains its 12% year-over-year growth projection for Baidu's cloud segment, bolstered by the adoption of Generation AI technology.
Despite the near-term challenges, Benchmark remains optimistic about Baidu's long-term potential. The firm believes that Baidu's stock offers valuable optionality as a leader in Generation AI and autonomous driving within the Chinese market.
Nevertheless, Benchmark acknowledges that the financial benefits of Baidu's innovative products may take time to realize, and the timing of a significant uptick in adoption is uncertain.
InvestingPro Insights
As Baidu (NASDAQ:BIDU) prepares to release its first-quarter earnings report, a closer look at the company's financial health through InvestingPro data reveals some key metrics. Baidu's market capitalization stands at a robust $39.77 billion, and with an adjusted P/E ratio of 14.32 as of the last twelve months of Q4 2023, the company presents a potentially attractive valuation for investors considering the tech sector's broader landscape. Additionally, Baidu's revenue growth of 8.83% during the same period showcases a resilient business model in a challenging macroeconomic environment.
InvestingPro Tips suggest that Baidu's PEG ratio of 0.08 indicates the stock may be undervalued relative to its expected earnings growth, offering a potential entry point for long-term investors. Moreover, with the firm's fair value estimates ranging from $154.4 to an InvestingPro Fair Value of $162.46, there appears to be an upside potential from its previous close price of $111.75. Investors looking to delve deeper into Baidu's financials and future prospects can access a wealth of additional insights on InvestingPro, where there are currently 5 more tips available to help inform your investment decisions. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain a competitive edge with comprehensive analysis and real-time data.
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