Baidu rises as J.P. Morgan upgrades, citing expected ‘meaningful’ ad recovery

Baidu shares rose on Thursday as investment firm J.P. Morgan upgraded the Chinese tech giant, noting there is an expected “meaningful” advertising recovery in the second-half of the year.

Analyst Alex Yao raised his rating on Baidu shares to overweight, noting that the decline in advertising looks to have “bottomed” in the second-quarter and the company has worked to improve its cost structure, leading to a stronger profit outlook.

Yao also said that unlike Kuaishou, Tencent and Bilibili, Baidu’s “ads resilience” is due to its performance-based nature and industry leading return on investment.

“We expect upward revisions to earnings estimates, which should in turn drive stock price upside,” Yao wrote.

Baidu shares added more than 0.5% to $144.78 in premarket trading.

The analyst also raised his 2022 and 2023 earnings per share estimates by 20% and 22% after Baidu reported strong second-quarter results earlier this week.

In addition to an expected advertising recovery for Baidu, Yao noted that there is expected upside over the next two quarters due to positive operating leverage and an inflection point for iQiyi’s operating profit, which Baidu owns a significant chunk of.

Baidu recently launched its first superconducting quantum computer that fully integrates hardware, software, and applications.

Analysts have been mixed on Baidu. It had an average rating of BUY from Seeking Alpha authors, while Wall Street analysts rate it a STRONG BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates BIDU a HOLD.

Author: Chris Ciaccia, Seeking Alpha

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