Wall Street praises "AI+ Intelligent Cloud": Bullish on BIDU-SW, inflection point of cloud business is coming!
However, considering the future development costs of Wenxin Yiyuan, the focus of attention in the future will be the sustainability of the current profit margin level. It is expected that the market's consistent profit expectations will be raised and the recent stock price will make a positive response to this performance.
In the first quarter of the release of the ChatGPT product, BIDU-SW's revenue and profits both exceeded expectations!
According to the quarterly report released yesterday, BIDU-SW's revenue for the quarter was RMB 31.1 billion, a year-on-year increase of nearly 10%, exceeding the market's expected RMB 30.01 billion; the attributable net profit (non-GAAP) reached RMB 5.7 billion, a year-on-year increase of 48%.
Morgan Stanley commented that due to continuous cost optimization, BIDU-SW's performance in the first quarter of 2023 was positive, with revenue exceeding expectations and profit margins far exceeding expectations. Considering the future development costs of ChatGPT, the focus will be on the sustainability of the current profit margin level. It is expected that the market's consensus profit expectations will be raised and the stock price will respond positively to this set of performance in the near future.
Overnight, BIDU-SW's US stocks also rose more than 4%; today's Hong Kong stocks also rose more than 2% at one point.
It is worth noting that the most eye-catching point in BIDU-SW's performance this period is that the intelligent cloud business achieved profitability for the first time, with revenue increasing by 8% year-on-year to RMB 4.2 billion.
Generative AI and the Wenxin large model have helped BIDU-SW achieve impressive results, and Wall Street is also quite optimistic about ChatGPT, AI, and cloud computing.
Goldman Sachs believes that as BIDU-SW's cloud achieves profitability for the first time, revenue growth is leading its peers. In the long run, the integration of cloud business and ChatGPT brings profit advantages.
The bank expects that starting from the second quarter, BIDU-SW's advertising and cloud businesses will achieve accelerated growth and gradually realize commercialization and traffic generation using the Wenxin large model. Therefore, BIDU-SW's stock price return will continue to be favorable!
Daiwa Securities also believes that the advantages of ChatGPT are expected to be reflected in BIDU-SW's search and cloud businesses starting this year. The new opportunities brought by ChatGPT will accelerate the revenue growth of BIDU-SW's cloud, and the cost structure will continue to improve, marking the turning point of BIDU-SW's cloud business!
Therefore, the bank raised BIDU-SW's Hong Kong stock target price from HKD 200 to HKD 210, a 5% increase. Based on the current price, this price means that there is still 68% upside potential!