BIDU: Mobile Distance Proximity Bidding Targeting a Bigger Customer Base – A Potential Growth Driver; Upgrade to BUY from Hold Rating
Beyond BIDU’s mixed 1Q15 result and soft 2Q15 guidance, we believe its search business has significant potential to resume high growth toward 2H2015 driven by its new mobile initiatives, mainly its distance proximity bidding, which allows businesses to conduct search marketing in a locally defined territory. BIDU plans to introduce it to the market in 2Q15. We believe it has the potential to capture customers’ needs for location based services and to become a new engine for the company’s future growth. As for its earnings, the weakness in 1H15 can be a result of seasonality and business transition. We believe BIDU’s continuous efforts in mobile initiatives may ultimately position the company to resume past growth. As such, we upgrade the stock from a Hold to BUY rating with a price target of $239.