Shares of Baidu Inc., China's most popular Internet search engine, surged Thursday after issuing better-than-expected first-quarter results and an upbeat outlook.
The company said growth was sparked by its new Phoenix Nest online ad system as well as better spending from advertising customers. Baidu also got a big boost in China last month after chief rival Google Inc. shut its mainland-based search engine to move to the Chinese territory of Hong Kong. Google was protesting government censorship of search results.
"Baidu reported a blowout quarter and issued second-quarter guidance significantly ahead of estimates," said RBC Capital Markets analyst Stephen Ju in a note to clients. "Based on our channel checks, we believe Baidu is starting to realize some of the benefits of its competitor's exit."
Shares were up $90.88, or nearly 15 percent, at $712.26 in afternoon trading Thursday. Ju raised his price target to $954 up from $739 and maintained his "Outperform" rating on the stock.
The company also announced a 10-for-1 stock split on its American depositary shares effective May 12, which should make it cheaper for foreign investors to jump on its growth bandwagon.
Baidu said Wednesday that its first-quarter net income jumped 165 percent to $70.4 million, or $2.02 per share, while revenue grew 60 percent to $189.6 million. Both measures exceeded the expectations of analysts polled by Thomson Reuters.
For the second quarter, Baidu said it expects revenue to rise 67 percent to 70 percent to between $268 million and $274 million. Analysts, on average, had expected $240 million in second-quarter revenue.
In afternoon trading, Google shares rose 39 cents to $529.58.
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