On Friday, Bernstein analysts adjusted their outlook on Baidu stock (NASDAQ:BIDU), lowering the price target from $90.00 to $87.00. The firm maintained a Market Perform rating on the shares. The revision reflects concerns over Baidu's monetization capabilities, particularly in building an effective AI merchant and user ecosystem. The Chinese tech giant, currently trading at $81.34 with a market capitalization of $28.52 billion, appears undervalued according to InvestingPro analysis.
The analysts noted that Baidu's recovery is now projected to be more of a 2026 event, pushing expectations further into the future. They emphasized that the company's return on invested capital (ROIC) trajectory is anticipated to be below industry standards, with current ROIC at 5%. The challenges in monetization are attributed to longer-than-expected timelines and lower advertising rates. InvestingPro subscribers can access detailed financial health metrics and 12+ additional ProTips about Baidu's performance.
Baidu's difficulties in harnessing AI for search monetization have led to a revision of the 2025 earnings estimates. These challenges are compounded by a weaker macroeconomic environment, which is likely to affect advertising budgets that are critical for Baidu's revenue.
The adjusted price target of $87.00 is also presented in Hong Kong dollars (HKD85), providing an international perspective on the valuation. Bernstein's stance remains at Market Perform, indicating a neutral outlook on the stock's potential performance relative to the broader market.
The analysts' statement concluded with a reaffirmation of the Market Perform rating, underscoring the view that Baidu's recovery is not yet visible and that the company is expected to underperform the sector in the long term due to suboptimal ROIC. Despite these concerns, InvestingPro data shows Baidu maintains a GREAT financial health score of 3.02, with a P/E ratio of 10.56. Investors can access comprehensive analysis through InvestingPro's detailed research reports, available for over 1,400 US-listed companies.
In other recent news, Baidu has been the focus of several analyst adjustments. JPMorgan downgraded Baidu's stock from Overweight to Neutral, citing concerns about the company's earnings potential and the impact of its artificial intelligence content strategy on revenue. The firm also revised its 2025 estimated adjusted earnings per share for Baidu downwards by 21%, positioning it 17% below the Bloomberg consensus.
Susquehanna also shifted its rating on Baidu from Positive to Neutral due to ongoing challenges in the macroeconomic environment and difficulties with monetizing the company's AI-powered search capabilities. Despite these downgrades, Mizuho (NYSE:MFG) Securities, Benchmark, and Tiger Securities have revised their price targets for Baidu while maintaining positive ratings, anticipating revenue growth re-acceleration in 2025.
These recent developments highlight Baidu's ongoing commitment to AI and technology as it navigates a challenging macroeconomic environment. Despite broader macroeconomic challenges, Baidu continues to focus on its AI-first strategy, with notable advancements in AI-driven product transformation and autonomous driving technology. The company also continues its share buyback program, with $161 million of shares repurchased since early Q3.
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