Deutsche Bank has upgraded one of China's largest Internet companies, Baidu, from "hold" to "buy," expecting artificial intelligence to push its shares higher, CNBC writes. Analyst Leo Chiang also raised his target price on the stock from $88 to $156, implying a 23% upside potential over a 12-month horizon.
"Baidu has established a set of leading AI businesses spanning cloud computing, robotaxis, intelligent search and AI chips. Collectively, we believe these growing AI businesses will be the driver of the company's next stage of development," he wrote.
Baidu shares fell by 0.7% in trading on November 7. Since the beginning of the year, they have already grown by 51%, outperforming the technology index Nasdaq Composite, which added about 18%.
What does Deutsche Bank see as Baidu's growth driver?
Chiang highlighted four areas that he believes will be the main drivers of Baidu's stock growth. Among them are AI Cloud, a cloud computing platform that offers enterprise customers a complete AI infrastructure stack with high cost efficiency, and Apollo Go, a robotaxi platform that already leads the world and continues to expand its presence. Third is the development of intelligent internet search, as well as Kunlunxin, a subsidiary of Kunlunxin that makes AI chips and stands to benefit from rising capital expenditure on artificial intelligence. The latter, according to the analyst, is "in an excellent position to capitalize on the growth in AI capital expenditure" and could provide "significant upside potential."
In the short term, Chiang estimates that weak results in the advertising segment will lead to a 3% decline in Baidu's total revenue in fiscal 2025, which ends in December. By contrast, he expects revenue from cloud services to grow 23% year-on-year already in the current fiscal year.
"Looking ahead to fiscal 2026 and beyond, we expect a turnaround in total revenue growth, supported by the gradual stabilization of advertising revenue as the impact of search transformation fades and monetization through agents and digital avatars grows, as well as sustained strong momentum in cloud revenue," the Deutsche Bank analyst added.
What are other analysts saying?
In October, Citigroup raised its target price on Baidu shares from $143 to $166, maintaining a "buy" recommendation. Its target assumes the stock will grow by more than 30%.
Macquarie also raised its recommendation on Baidu from a hold to a buy on its shares and increased its target share price from $91 to $176. Its valuation implies a potential upside of almost 40%.
According to MarketScreener, analysts generally maintain a positive view on Baidu, with 23 analysts recommending buying the company's stock, nine advising a hold, and only one thinking it's worth selling.
This article was AI-translated and verified by a human editor
