BIDU(US:BIDU)2024-10-30 07:02Investment Rating - The report assigns a "Buy" rating for Baidu (BIDU US) with a target price of $111.00, indicating a potential upside of 18.6% from the current price of $93.59 [1][10]. Core Insights - Short-term search advertising revenue is expected to be under pressure, with a focus on the transformative impact of AI on search products [1]. - For Q3 2024, Baidu's core revenue is projected to be 26.36 billion RMB, a year-on-year decline of 0.8%, with adjusted operating profit expected at 6.53 billion RMB, corresponding to a profit margin of 24.8% [1][2]. - The report highlights a continued double-digit growth expectation for the cloud business, with revenue anticipated to reach 4.93 billion RMB, a year-on-year increase of 12% [2][3]. Financial Performance Summary - Revenue for Baidu is forecasted to be 133.72 billion RMB in 2024, reflecting a slight decline of 0.6% year-on-year, with net profit expected at 26.28 billion RMB, down 7.6% [6][11]. - The adjusted operating profit margin is expected to remain stable at around 24.8%, despite the downward adjustment in advertising revenue [3][7]. - The report anticipates a decrease in advertising revenue by 2% in 2024, while the cloud business is expected to continue its growth trajectory [3][8]. Product and Innovation Developments - Baidu's recent product upgrades include the launch of the Baidu AI Heterogeneous Computing Platform 4.0 and the Qianfan Large Model Platform 3.0, which integrates various domestic and international models [2][3]. - New AI-native applications have been introduced, including intelligent customer service and digital human products, aimed at enhancing user engagement and operational efficiency [2][3]. Valuation and Market Position - The valuation method has been adjusted to a price-to-earnings ratio, with a target price set at 111 USD, reflecting an 11x P/E ratio for 2024 [3][9]. - The current price corresponds to an 8.9x P/E ratio for 2024, indicating that the stock is trading at historical lows, suggesting a potential investment opportunity [3][9].