BEIJING, February 17 (afternoon) -- The U.S. investment bank Pacific Crest released a research report today granting Baidu's (Nasdaq: BIDU) stock an "outperform" rating with a target price set at $205. Below is a summary of the report:
Baidu reported strong performance in Q4 of 2011. Financial statements show that Baidu's net profit for Q4 was $326.3 million, higher than the analysts' average estimate of $308.8 million; earnings per share were $0.95, also better than the analysts' average estimate of $0.91. Baidu expects its revenue in Q1 of 2012 to grow year-on-year by 85%, which is better than the analysts' average estimate of 82%.
Increased spending by advertisers continues to drive Baidu's performance up. Baidu's user numbers in Q4 were slightly lower than our expectations, but the average revenue contributed by each advertiser to Baidu was much higher than expected. The average revenue generated by each advertiser for Baidu was RMB 14,400, increasing year-on-year by 62.2%. We had predicted RMB 13,845, an increase of 55.9% year-on-year.
We have upgraded our earnings per share forecast for Baidu in 2012. We have raised our forecast for Baidu's earnings per share in 2012 from $4.78 to $5.10, while maintaining our forecast for Baidu's total revenue in 2012 unchanged. The upgrade in earnings per share forecasts is mainly due to Baidu's interest income and currency appreciation.
Search remains a highlight. We remain cautious about the entire advertising market in China, but search will continue to be a highlight of this market. Although it is difficult to make an accurate assessment of Baidu's performance trend throughout 2012, we believe it is still the best-performing internet company in China currently, so there should be no concern about its performance, especially given Baidu’s strong Q1 earnings guidance.
We give Baidu's stock an "outperform" rating with a target price set at $205. (Sheng Li)