Technology Stocks

Can IQIYI Inc (NASDAQ:IQ) Capitalize on Chinese Rebound?

IQIYI Inc (NASDAQ:IQ) has been grinding lower, undercutting support after a powerful move higher in the spring. Shareholders have been looking for a new catalyst. To that end, the company recently announced it has signed MOU with Viacom International Media Networks (VIMN), a division of Viacom Inc. (NASDAQ: VIA, VIAB), to produce and distribute the second season of iQIYI’s original animated children’s series Deer Run.

That offers the market a standard catalyst. However, given the bloodfest going on in Chinese markets over the past few months (driven by US tariffs and concerns about an unsustainable debt scenario), more may be needed here. One potential lift could come from stimulus in China, such as the new tax plan offered up by Chinese officials on Monday night.

IQIYI Inc (NASDAQ:IQ), for a little background, bills itself as an innovative market-leading online entertainment service in China. The company is often called “the Netflix of China”.

According to company materials, “Its corporate DNA combines creative talent with technology, fostering an environment for continuous innovation and the production of blockbuster content. iQIYI’s platform features highly popular original content, as well as a comprehensive library of other professionally-produced content, partner-generated content and user-generated content. The Company distinguishes itself in the online entertainment industry by its leading technology platform powered by advanced AI, big data analytics and other core proprietary technologies. iQIYI attracts a massive user base with tremendous user engagement, and has developed a diversified monetization model including membership services, online advertising services, content distribution, live broadcasting, online games, IP licensing, online literature and e-commerce etc.”

Moreover, iQIYI, Inc., together with its subsidiaries, provides online entertainment services under the iQIYI brand name in China. It operates a platform that provides a collection of Internet video content, including professionally-produced content licensed from professional content providers and self-produced content.

The company also operates movie theaters in China. In addition, it provides membership, content distribution, live broadcasting, and online gaming services. The company was formerly known as, Inc. and changed its name to iQIYI, Inc. in November 2017.

iQIYI, Inc. was incorporated in 2009 and is based in Beijing, China. iQIYI, Inc. is a subsidiary of Baidu Holdings Limited.


Searching for Support

We started off by noting that IQ recently hit the wires with the announcement it has signed MOU with Viacom International Media Networks (VIMN), a division of Viacom Inc. (NASDAQ: VIA, VIAB), to produce and distribute the second season of iQIYI’s original animated children’s series Deer Run.

While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action IQ shareholders really want to see.

In total, over the past five days, shares of the stock have dropped by roughly -9% on above-average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities.

“iQIYI is excited to be partnering again with VIMN for another season of Deer Run,” said Wang Xiaohui, Chief Content Officer at iQIYI. “The show’s engaging plot is both entertaining and educational and we predict great things for this IP going forward. iQIYI is committed to producing outstanding original content and we will continue to work with talented partners to bring the best content to our users.”

IQIYI Inc (NASDAQ:IQ) managed to rope in revenues totaling $967.4M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top-line growth of 53.4%, as compared to year-ago data in comparable terms.

In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($2B against $2.2B, respectively).

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