Baidu's 'Double-Edged Sword' Explained

On Thursday, Brean Capital issued an earnings review on Baidu Inc (ADR) (NASDAQ: BIDU) after the company reported missed estimates a day before. Brean reiterated its Buy rating on the stock, but lowered its price target from $275 to $250.

Regarding the miss, analysts Fawne Jiang and Long Lin wrote, "Management indicated that the softer-than-expected revenue growth in 1Q is mainly attributable to the late Chinese New Year and lower mobile monetization rate with higher mix of mobile traffic during the holiday season."

The analysts also remarked that Baidu can recover from the earnings miss.

How?

Related Link: Here's How Much Baidu Should Move Post-Earnings

If its fundamentals and top line growth can be driven by mobile traffic and increases in mobile monetization, they explain. Jiang and Lin call this Baidu's "double-edged sword."

Going forward, management expects to increase strategic investments in areas such as Mobile Baidu and Baidu Wallet. Analysts believe that this will add variability to the company's margin expectations in 2015.

Baidu.com, Inc. closed Wednesday at $214.67.