Nomura raises Baidu's target price to $196, Kunlun Tech's IPO and dividend distribution expected to become market focus

Nomura published a research report indicating that Baidu (BIDU.US) is expected to have fourth-quarter performance in its core business that will generally meet expectations. Total revenue may decrease by 5.7% year-on-year to 26 billion RMB, with advertising revenue potentially falling by 15.5%, although the quarterly decline is expected to narrow slightly; its artificial intelligence infrastructure revenue may remain strong, increasing by 34% quarter-on-quarter to 5.6 billion RMB.

The firm believes that Baidu is affected by the continued weakness in its advertising business, and operating profit margins are likely to remain under pressure, estimating a year-on-year decline of 6.6 percentage points to 10.2% in the fourth quarter, and expecting non-GAAP operating profit to drop by 43% year-on-year to 2.7 billion RMB.

The firm believes that the market will focus on the IPO process of Baidu's chip subsidiary Kunlun and the company's capital return plan involving dividends for the new year. The firm raised the company's target price from $178 to $196, maintaining a "Buy" rating