NEW YORK (TheStreet) -- Baidu (BIDU) shares are up 2% to $195.05 in pre-market trading on Monday after being upgraded to "overweight" from "equal weight" by analysts at Morgan Stanley (MS).
The firm vastly increased its price target to $144.70 from $93 due to increased revenue and that the Chinese language search engine exceeded the company's own guidance.
"In 2Q, mobile services contributed more than 10% of Baidu's total sales for the first time, driven by increasing adoption and monetization. The integration of PC and mobile bidding platforms have facilitated advertising on mobile with an improved customer experience," said analysts at the firm.
TheStreet Ratings team rates BAIDU INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate BAIDU INC (BIDU) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BIDU's very impressive revenue growth greatly exceeded the industry average of 12.1%. Since the same quarter one year prior, revenues leaped by 59.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BAIDU INC has improved earnings per share by 22.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BAIDU INC increased its bottom line by earning $4.96 versus $4.78 in the prior year. This year, the market expects an improvement in earnings ($33.30 versus $4.96).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Internet Software & Services industry average. The net income increased by 24.0% when compared to the same quarter one year prior, going from $328.92 million to $407.82 million.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 72.21% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.56 is very high and demonstrates very strong liquidity.
- You can view the full analysis from the report here: BIDU Ratings Report