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Brean Murray Lowers PT On Baidu.Com (BIDU) To $194, Maintains 'Buy'

 April 25, 2012 10:07 AM

(By Balachander S) Brean Murray, Carret & Co. (BMC) lowered its price target on shares of Baidu.com Inc. (Nasdaq:BIDU) to $194 from $200, while maintaining its "Buy" rating on the stock.

The brokerage said it would recommend investors to capitalize on the weakness of the stock and accumulate shares at this level. Baidu stock traded down substantially aftermarket yesterday as the company reported mixed 1Q results and soft 2Q guidance.

"While the quarter was generally below expectations, we wanted to point out a few data points that could suggest positive growth momentum of the company in the coming quarters, especially 2H," BMC said.

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The brokerage said number of customers grew sequentially in 1Q for the first time since 2008, implying a robust start in SME growth; customer deposits (a good leading indicator for revenue) grew 60 percent YoY in 1Q12, the highest 1Q growth since 2009; average spending per advertisers declined 7.4 percent QoQ, implying the robust growth on SME, yet with big advertisers likely having a slow start.

Despite a seasonally weak quarter, the total number of advertisers increased 3.2 percent QoQ, implying a robust start in SME growth. This was largely attributable to Baidu's nationwide marketing campaign last year and the increasing resources allocated and incentives developed to recruit SME customers earlier this year, BMC said.

BMC believes Baidu's growth story is largely intact in 2012 with SME starting robustly, while big advertisers' spending will ramp up to 2H.

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American depositary receipts (ADR) of the China-based Internet search provider dropped 3.49 percent to trade at $131.06 on Wednesday.



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