The Chinese streaming company's valuation bounced back from its post-IPO stumbles and held on to its pricing gains thanks to solid quarterly results.
iQiyi is a streaming video platform spun off from parent company and Chinese search-engine leader Baidu. The newly independent company offered 125 million shares at a price of $18 per share in its March 28 market debut, aiming to raise roughly $2.25 billion in funds and value the business at roughly $13 billion. Things didn't start out so well.
The stock was volatile out the gate, dropping roughly 14% in its first day of trading. The company may have struggled post-IPO because of concerns about a trade war between the United States and China, the fact that the business is still operating at a loss, and the competitive threats posed by rivals including Tencent and Alibaba.
iQiyi's gains in April appear to have been mostly the result of bouncing back from the early IPO stumbles. The company's share price moved little following its earnings report on April 26 despite the business recording strong results that included a 57% year-over-year sales increase and a 67% increase for membership services revenue.
iQiyi shares continue to be volatile and have recently seen big pricing gains. The stock is up roughly 19% this month so far and climbed roughly 11% on May 10 following news of strong results for its partnership for a joint-membership drive with e-commerce company JD.com. iQiyi reported that more than a million people have signed up for the joint membership since it was launched on April 27.
While iQiyi's share price may continue to see wide fluctuations in the near term, the stock has promise as a long-term investment. The company's platform already has more than 420 million users, with roughly 60 million paying for premium service and the remainder on an ad-supported model. iQiyi has been rapidly growing its paid subscriber count, and growth for China's middle class and a strong outlook for the country's entertainment industry suggest a long runway for growth.
Keith Noonan owns shares of iQiyi. The Motley Fool owns shares of and recommends Baidu, JD.com, Netflix, and Tencent Holdings. The Motley Fool recommends iQiyi. The Motley Fool has a disclosure policy.