Baidu ( NASDAQ: BIDU ) shares rose on Thursday as investment firm J.P. Morgan upgraded the Chinese tech giant, noting there is an expected "meaningful" advertising recovery in the second-half of the year.
Analyst Alex Yao raised his rating on Baidu ( BIDU ) shares to overweight, noting that the decline in advertising looks to have "bottomed" in the second-quarter and the company has worked to improve its cost structure, leading to a stronger profit outlook.
Yao also said that unlike Kuaishou, Tencent ( OTCPK:TCEHY ) and Bilibili ( BILI ), Baidu’s "ads resilience" is due to its performance-based nature and industry leading return on investment.
"We expect upward revisions to earnings estimates, which should in turn drive stock price upside," Yao wrote.
Baidu ( BIDU ) shares added more than 0.5% to $144.78 in premarket trading.
The analyst also raised his 2022 and 2023 earnings per share estimates by 20% and 22% after Baidu ( BIDU ) reported strong second-quarter results earlier this week.
In addition to an expected advertising recovery for Baidu ( BIDU ), Yao noted that there is expected upside over the next two quarters due to positive operating leverage and an inflection point for iQiyi's ( IQ ) operating profit, which Baidu owns a significant chunk of.
Baidu ( BIDU ) recently launched its first superconducting quantum computer that fully integrates hardware, software, and applications .
Analysts have been mixed on Baidu ( BIDU ). It had an average rating of BUY from Seeking Alpha authors , while Wall Street analysts rate it a STRONG BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates BIDU a HOLD .
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Baidu rises as J.P. Morgan upgrades, citing expected 'meaningful' ad recovery