Here's Why Pacific Crest Loves Baidu And Qunar Cayman Islands

In a report published Tuesday, Pacific Crest analyst Cheng Cheng came away from a recent China Internet trip with positive commentary on two specific companies: Baidu Inc (ADR) (NASDAQ: BIDU) and Qunar Cayman Islands Ltd (NASDAQ: QUNR).

Baidu: Robust Search Advertising Outlook

According to Cheng's conversations around search advertising budgets for Baidu revealed that existing key account customer budgets are projected to increase by 40 percent year-over-year in 2015. The analyst added that this is indicative of a "solid" outlook and supports revenue growth acceleration in the second quarter, which is an area of focus for investors.

As such, the analyst revised his fiscal 2015 revenue estimates to $11.02 billion from a previous $10.73 billion. His earnings per share estimates remained unchanged at $7.11.

Shares remain Overweight rated with an unchanged $260 price target.

Qunar: Stability To Continue

Cheng stated that conversations with the company suggested the competitive environment remained stable in the first quarter. The analyst added that both Qunar and Ctrip.com International, Ltd. (NASDAQ: CTRP) talked about stable pricing trends in the near term, which has played out according to plan. As such, Qunar should see volume growth in 2015.

In fact, Cheng suggested that analysis on mobile cohorts suggests that current volume growth estimates for 2015 may be conservative. Additionally, his cohort analysis suggests that a majority of volumes in 2015 will be on the back of cohorts added in previous years, thereby reducing risk around decreasing efficiency on user acquisitions in 2015 due to increased demand in mobile advertising channels.

Shares remain Overweight rated with a price target raised to $55 from a previous $41.