iQiyi (NASDAQ:IQ) is no longer a broken IPO. China's leading streaming video service in terms of monthly active users and overall time spent on the platform moved 26.9% higher last week, surging after offering up encouraging signs that its recently announced partnership with online retail giant (NASDAQ:JD) is already paying off. iQiyi also landed a potentially significant certification from China's leading digital rights organization. An analyst initiating coverage with a bullish rating is the cherry on top.

Last week's big gain is a narrative-changing move. iQiyi started off the week below last month's IPO price of $18. It's now trading comfortably above its debutante price.

iQiyi app in action.

Image source: iQiyi.

Streaming along

It's been just two weeks since iQiyi and announced a cross-promotional partnership where anyone signing up for an annual subscription to either platform's premium service would receive access to the other offering's perks. iQiyi and revealed last week that a million people have already signed up for the combined plan for iQiyi VIP or JD Plus. 

A million iQiyi VIP accounts may not seem like a lot, but last week's announcement also said that there are now more than 61 million iQiyi premium subscriptions. There were just 50.8 million paying subscribers at iQiyi at the end of 2017, so growth this year has been phenomenal.  

The rally kept going a day after the partnership update as iQiyi announced that it was the first Chinese video platform to have its digital rights management system approved by the Hollywood-recognized ChinaDRM Lab. Certification may not be the same kind of needle mover as its success nabbing premium users, but it will make it that much easier for iQiyi to secure marquee content in the future. 

The double dose of good news came after Goldman analyst Piyush Mubayi initiated coverage of the stock with a buy rating and a $23 price target. With iQiyi's stellar growth in its first quarter as a public company -- up 57% for the period after surging 55% for all of 2017 -- the dot-com speedster is living up to the hype. 

The vast majority of iQiyi's more than 420 million monthly active users may be ad-supported freeloaders, but iQiyi's biggest growth is coming from premium users. Membership services revenue outpaced ad revenue in the first quarter -- up 67% versus 52% -- and should become the top revenue category in the current quarter. iQiyi is still running at a steep operating loss, but that isn't a deal breaker at this point in its growth cycle. 

We may not have seen the end of iQiyi's days as a broken IPO. The stock is volatile, and the next market downdraft can send the shares below $18 again. However, a flurry of good news will make it that much easier to bounce back if it should buckle under again.

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