Deutsche Bank Downgrades Baidu

    August 24, 2010

Today is perhaps not a day on which a lot of investors will conduct spending sprees; the Dow’s down 1.10 percent right now, which isn’t at all encouraging.  But Deutsche Bank has come to believe that investors almost definitely shouldn’t acquire shares of Baidu, downgrading the stock from "Buy" to "Hold."

Deutsche Bank analyst Alan Hellawell explained his company’s stance in a research note, stating, "With Baidu’s monetization metrics having taken a step up to a higher level, we expect the incremental benefit from [new advertising system] Phoenix Nest to wane."

"We thus expect upside potential to market forecasts to be limited," Hellawell then continued.  "We do not expect growing B2C ad budgets to substantially drive Baidu’s revenue growth in the next 2-3 years."

That’s bad news for the company, since with Google more or less out of the way, many onlookers guessed Baidu would be able to dominate the industry, first making more money as its market share increased and then just benefiting as online ads became more popular.

On the bright side, Deutsche Bank did at least lift its price target on Baidu from $80 to $86, which is a nice bit of news for current shareholders.

For the record, Baidu’s stock is down 2.37 percent at the moment.