Fundamental:
Chinese video streaming player iQIYI (
IQ
) has shifted its attention from growth to profits and has been implementing cost cuts and price hikes to meet this new focus. Provided such cost cuts do not cut into long term competitiveness, rising consumer purchasing power in China, along with international expansion efforts are growth drivers that could support iQIYI's top line.
After years of losses, Chinese tech giant Baidu's (BIDU) video streaming unit iQIYI turned its third consecutive quarterly operating profit in Q3 2022, generating an operating income of CNY 309.7 million compared with an operating loss of CNY 1.4 billion the same quarter last year. Profitability also improved YoY and sequentially, with gross margins expanding to 24% from just 7.4% the same quarter in 2021, and 21% the previous quarter.
Much of iQIYI's profitability improvement is driven by management switching from focusing on growth to focusing on profitability. Towards that end, content costs were reduced, and subscription fees were increased; in Q3 2022, content costs were down 18% YoY, selling, general, and administrative expenses dropped 21% YoY, R&D expenses were down 30% YoY, continuing from last quarter's momentum; Q2 2022, content costs were down 24% YoY, selling, general, and administrative expenses dropped 32% YoY, R&D expenses were down 29% YoY. Going forward, iQIYI expects to post a final net loss in 2023 before turning a profit of CNY 991 million in 2024.
Just about 74 million of Netflix's (NFLX) 200 million plus subscribers' hail from North America, accounting for about a fifth of the region's population. By contrast, iQIYI's paying subscriber base of about 100 million subscribers account for just about 7% of China's 1.4 billion population.
Therefore, there’s plenty of room to go for
IQ
in the future. In April this year, iQIYI was added to the U.S. SEC's growing list of companies that could be delisted. Although delisting risks reduced with the U.S. and China reaching a deal allowing American officials access to Chinese audit papers, simmering tensions between the two nations may reignite regulatory scrutiny. Unlike many Chinese companies that have secondary listings in Hong Kong, iQIYI as yet does not seem to have a Hong Kong listing. And I do not think
IQ
will be delisted by SEC.
Technical:
IQ daily chart
From the tech side of analysis, as I mentioned I don't think IQ will be delisted in next couple months or even years, therefore, it's unlikely to keep making new lows. The recent Chinese stock bounce gave IQ a pretty sharp short term uptrend, and it might break up its $4 resistance and reach $5, maybe you think it just a dollar trade, but if you calculated by percentage, its almost 66% upside potentionals. It is definitely worth a shot.
Please feel free to express your ideas and thoughts in the comment section.
Chinese video streaming player iQIYI (
IQ
) has shifted its attention from growth to profits and has been implementing cost cuts and price hikes to meet this new focus. Provided such cost cuts do not cut into long term competitiveness, rising consumer purchasing power in China, along with international expansion efforts are growth drivers that could support iQIYI's top line. After years of losses, Chinese tech giant Baidu's (BIDU) video streaming unit iQIYI turned its third consecutive quarterly operating profit in Q3 2022, generating an operating income of CNY 309.7 million compared with an operating loss of CNY 1.4 billion the same quarter last year. Profitability also improved YoY and sequentially, with gross margins expanding to 24% from just 7.4% the same quarter in 2021, and 21% the previous quarter.
Much of iQIYI's profitability improvement is driven by management switching from focusing on growth to focusing on profitability. Towards that end, content costs were reduced, and subscription fees were increased; in Q3 2022, content costs were down 18% YoY, selling, general, and administrative expenses dropped 21% YoY, R&D expenses were down 30% YoY, continuing from last quarter's momentum; Q2 2022, content costs were down 24% YoY, selling, general, and administrative expenses dropped 32% YoY, R&D expenses were down 29% YoY. Going forward, iQIYI expects to post a final net loss in 2023 before turning a profit of CNY 991 million in 2024.
Just about 74 million of Netflix's (NFLX) 200 million plus subscribers' hail from North America, accounting for about a fifth of the region's population. By contrast, iQIYI's paying subscriber base of about 100 million subscribers account for just about 7% of China's 1.4 billion population.
Therefore, there’s plenty of room to go for
IQ
in the future. In April this year, iQIYI was added to the U.S. SEC's growing list of companies that could be delisted. Although delisting risks reduced with the U.S. and China reaching a deal allowing American officials access to Chinese audit papers, simmering tensions between the two nations may reignite regulatory scrutiny. Unlike many Chinese companies that have secondary listings in Hong Kong, iQIYI as yet does not seem to have a Hong Kong listing. And I do not think
IQ
will be delisted by SEC. Technical:
From the tech side of analysis, as I mentioned I don't think IQ will be delisted in next couple months or even years, therefore, it's unlikely to keep making new lows. The recent Chinese stock bounce gave IQ a pretty sharp short term uptrend, and it might break up its $4 resistance and reach $5, maybe you think it just a dollar trade, but if you calculated by percentage, its almost 66% upside potentionals. It is definitely worth a shot.
Please feel free to express your ideas and thoughts in the comment section.