CHINA NEWSPHOTO/Reuters
Baidu Inc., the Chinese-language Internet search provider, took a tumble on Nasdaq today after a downgrade from Deutsche Bank highlighted how a new competitor has moved aggressively onto its turf.
Deutsche Bank downgraded its rating to "hold" from "buy" and slashed its price target all the way to $137 (U.S.) from $186. The stock closed down 6.2 per cent at $115.09 on Nasdaq.
The big concern: the bank's checks indicated that Baidu lost 4 to 8 percentage points in search traffic market share to Qihoo 360 Technology Co. (QIHU-Q), which just launched its search engine a week ago.
Qihoo already had a large user base through its browser used by 51 per cent of the Chinese Internet population. Deutsche Bank commented that the user experience of Qihoo's search engine is "reasonably good."
It expects Baidu to lose market share to Qihoo during the next two quarters, and could shave about 9 per cent off of earnings per share for Baidu in 2013. Analysts at Deutsche Bank also cut their 2013 revenue forecast for Baidu by 6 per cent.
Baidu has an 80 per cent share in China and Deutsche Bank expects Qihoo's traffic share to grow over the next year to 15 to 18 per cent.
For its part, Qihoo was down 5 per cent today, but it had surged earlier this week after saying its third-quarter revenue may rise as much as 73 per cent to $82-million, topping analyst expectations.
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Hewlett-Packard Co.
While Hewlett-Packard reported a challenging quarter with deteriorating revenues, its earnings per share remain resilient thanks to cost-saving initiatives, noted RBC Securities analyst Amit Daryanani. "While we do expect margins and EPS to benefit from the $3.0-billion plus of restructuring savings in fiscal year 2013, it remains unclear to us how the company intends to stabilize its revenue line and how much of those savings will be reinvested versus flowed to the bottom line," he said.
Upside: Mr. Daryanani cut his price target by $2 (U.S.) to $25. Several other analysts also trimmed their price targets after HP's earnings, including Barclays Capital, which cut its target by $1 to $21.
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First Majestic Silver Corp.
First Majestic Silver has released an updated pre-feasibility study on its Del Toro silver mine in Mexico that shows a larger project with better economics. The project is now estimated to contain 90.3 million ounces of silver, up 10 per cent from earlier estimates, noted Dundee Securities analyst Dale Mah.
Upside: Mr. Mah raised his price target to $20.40 from $19.70 and maintained a "buy-speculative risk" rating.
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Pure Industrial REIT
Pure Industrial REIT has tentatively agreed to acquire 11 income-producing industrial properties across Canada for $91.6-million. It also announced this week a $30.2-million bought deal financing that was opportunistic, given the REIT is trading near all-time highs, noted M Partners analyst Brendon Abrams. "We continue to believe that as the REIT grows its portfolio, the additional scale, increased cash flow, and lower payout ratio will narrow the discount to its peers," he said.
Upside: Mr. Abrams raised his price target by 25 cents to $5.75 and reiterated a "buy" rating.
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Harley-Davidson Inc.
Harley-Davidson has released details on its new 2013 model year lineup, which includes 110th anniversary limited edition bikes based on 10 current models. BMO Capital Markets analyst Gerrick L. Johnson expects enthusiasts will react positively, adding that the company has "rediscovered its premium pricing power" by pushing through an average 1.3 per cent price increase on recurring models.
Upside: Mr. Johnson reiterated an "outperform" rating and $62 (U.S.) price target.
Darcy Keith