BIDU
The target got cut — not the thesis
UBS took a small scissors-to-the-price-target move on Baidu, lowering its U.S. target to $170 from $180 and its Hong Kong target to HK$165 from HK$175. But before you start imagining a full-on analyst meltdown, the firm kept its Buy rating intact.
Why UBS still likes the story
The real headline here is Baidu’s AI business. UBS expects AI-driven revenue to make up more than half of core revenue, with AI cloud infrastructure growing more than 40% in the first quarter thanks to strong demand and tighter supply across the industry. Translation: the AI arms race is still handing Baidu fresh fuel.
A few other bullish bits from the note:
- Baidu’s self-developed Kunlun chips are helping it win and renew customers
- AI-powered marketing is expected to keep growing at a healthy clip
- The company’s AI apps are still in growth mode, which is exactly what investors want to hear when everyone’s hunting for the next AI platform winner
The one cloudy spot
UBS isn’t pretending everything is sunshine and semiconductors. It expects core advertising revenue to fall 21% year over year, partly because the Lunar New Year timing made the comparison tougher. It also sees first-quarter core revenue dipping 2.4% to RMB 24.8 billion, with non-GAAP operating profit at RMB 3.2 billion and a 12.9% margin.
Big picture
This is one of those classic Wall Street notes where the target comes down, but the story gets more convincing. Baidu’s old-school ad business is still under pressure, but if AI cloud keeps scaling this fast, investors may be willing to squint past the wobble and focus on the bigger prize.