Baidu Gets Better

Baidu's (NASDAQ: BIDU  ) return as a dot-com darling continues. 

Barron's is reporting that Citi is raising its price target on Baidu to $175. Citi's analysts are encouraged by the Chinese search giant's growing role in smartphones and tablets, and not just because of its widely applauded deal to snap up China's leading mobile-apps marketplace this summer. 

Citi now sees Baidu generating 28% of its revenue from mobile by 2015, up from its earlier projection of 22%. Citi estimates that mobile is already delivering a third of Baidu's search traffic. The problem that we've seen in search -- worldwide -- is that mobile isn't as lucrative as traditional PC searches. Advertisers aren't willing to spend as much to reach consumers on smaller screens that may not be as receptive to buy something. 

That's fine. Baidu will make it up in volume, just as global market leader Google has lately. Google has seen cost-per-click rates post year-over-year declines for several quarters now. The market expects that as mobile becomes a larger percentage of the traffic mix. But lower revenue per click isn't holding Big G back. Google is soaring today after offsetting an 8% decline in cost-per-click in last night's quarterly report with a 26% surge in paid clicks. 

Citi analysts see mobile as a positive, actually increasing net margins for Baidu relative to other revenue generators.

Baidu isn't just getting a boost because China's Internet leaders are showing signs of life. Youku Tudou (NYSE: YOKU  ) -- China's leading player in video streaming -- was talked down earlier this week. Wedge Partners issued a cautionary note on Youku Tudou, fearing that it may not be able to meet near-term growth targets. A big problem there is competition, and that now includes Baidu as Youku Tudou's biggest rival after gobbling up iQiyi and more recently PPS.

Given the competitive landscape in online video, it's a good thing that Citi's fond of mobile becoming a bigger part of the pie at Baidu. It's been clawing its way back in a hurry in recent months. The dot-com speedster fell out of favor last year when a leading Internet browser provider jumped into the search market last year. Citi's new $175 target is actually more than double Baidu's springtime bottom of $82.98 back in April. There will be challenges for Baidu in mobile -- and Citi's assumptions of improving mobile monetization may prove generous -- but it's great to see the pros talking up Baidu after talking it down during the latter half of last year and the first few months of 2013.

Welcome Baidu back as it closes in on an all-time high.

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