JPMorgan analysts downgraded Baidu (NASDAQ:BIDU) from Overweight to Neutral, reducing their price target to $87 from $130. The revision reflected concerns over diminishing earnings visibility driven by uncertainties in macroeconomic recovery and the impact of generative AI content deployment on monetization.
The analysts lowered Baidu’s 2025 adjusted EPS estimate by 21%, positioning it 17% below the Street consensus. The adjustment included a 7% cut in Baidu’s core advertising revenue and a 6-percentage-point reduction in core operating margin. While Baidu’s core advertising revenue growth was projected to bottom out in the first quarter of 2025 with subsequent acceleration, the pace of recovery remained uncertain, posing downside risks to consensus expectations.
Despite these challenges, the analysts highlighted Baidu’s substantial cash reserves. Net cash holdings, including deposits and wealth management products with maturities exceeding one year, accounted for 84% of the company’s market capitalization. This implied a low valuation of approximately 2x ex-cash 2025 earnings.