Haitong International has released a report maintaining its forecasts for Baidu's (BIDU, Financial) fourth-quarter performance. The core advertising and cloud business revenues are expected to grow annually by 9.5% and 13%, respectively. However, the forecast for the core non-GAAP operating profit margin has been revised downward from 21% to 19%, reflecting adjustments in the company's structure, a shift toward lower-margin business sectors, and investments related to large language models (LLM).
The report anticipates that Baidu's core revenue will decline slightly by 0.1% this year, with the core non-GAAP operating profit margin decreasing by 0.5 percentage points to 24%, both figures falling slightly below market consensus. Considering the potential commercialization of LLM and related promotional efforts, along with the downside risks in revenue composition, the non-GAAP operating profit margin forecast for next year has also been lowered by one percentage point to 24%.
Haitong International has adjusted Baidu's target price from $108 to $102, taking into account the potential of large language models and Baidu's favorable cash levels. The firm's price-to-earnings ratio is expected to remain higher than other slower-growing internet giants like Alibaba. Baidu maintains an "outperform" rating.
