Analyst Alicia Yap from Citi maintained a Buy rating on Baidu and increased the price target to $140.00 from $138.00.
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Alicia Yap’s rating is based on several strategic developments and growth prospects for Baidu. Despite the anticipated decline in core advertising revenues due to the AI transformation in search queries, the company is expected to maintain strong growth in its AI Cloud segment, with a projected 25% year-over-year increase. This indicates a robust demand in the cloud sector, which is a positive sign for the company’s future performance.
Alicia Yap also highlights the potential support for Baidu’s share price from its ongoing developments, such as the release of Ernie 4.5 open source, the introduction of MuseStreamer, and the progress in the Robotaxi rollout. These innovations, coupled with the company’s undemanding valuation, contribute to the positive outlook. Despite the current pressure on advertising revenues, these factors collectively justify the Buy rating, with a sum-of-the-parts valuation target of $140.
In another report released yesterday, Jefferies also maintained a Buy rating on the stock with a $110.00 price target.