Please ensure Javascript is enabled for purposes of website accessibility

Why iQiyi Inc. Stock Popped Today

By Steve Symington – Updated Nov 1, 2018 at 3:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Chinese video-streaming leader bounced back with a little help from Wall Street.

What happened

After plunging on the company's mixed third-quarter report on Wednesday, shares of iQiyi Inc. (IQ 9.09%) have all but recouped those losses, rising 12.6% as of 3 p.m. EDT on Thursday after multiple analysts came to the defense of the Chinese video-streaming giant.

So what

For perspective, iQiyi stock dropped more than 11% yesterday after the company confirmed it incurred a $0.63-per-share adjusted net loss -- wider than the $0.43 loss most investors were expecting -- on strong sales of $1 billion (up 48% year over year) in the third quarter. 

Stock market charts indicating gains, overlaying a digital world map

Image source: Getty Images.

Following the report, however, at least three analysts weighed in with positive notes on iQiyi. These included an upgrade from neutral to outperform from Credit Suisse's Thomas Chong, who suggested iQiyi's "core competence remains intact" with "proven success in original content." He also noted iQiyi still enjoys huge potential for increasing its paying customer base, which is expected to grow more than 40% next year to 125 million members.

China Renaissance Securities analyst Ella Ji also reiterated the firm's buy rating in iQiyi, while simultaneously reducing its per-share price target to $28 from $31 -- still a 40% premium from yesterday's close.

And finally, Jefferies' Karen Chan argued that even though "content costs will likely remain high, [iQiyi's] increased offerings of original content and a slowing of licensed-content cost growth pave the way for optimization."

Chan maintains a buy rating and a $33 price target on iQiyi.

Now what

Incidentally, these comments largely echo those of iQiyi management.

CEO Dr. Yu Gong explained in the company's earnings release late Tuesday: "Leveraging our extensive content offerings and expanding distribution network, we are also continuously improving and diversifying our business monetization. We remain dedicated to applying advanced technology to further enhance our platform and refine our ecosystem to generate long-term growth for shareholders."

Of course, iQiyi has also proven to be a particularly volatile stock since it spun off from parent company Baidu in March, especially given broader weakness in the Chinese markets this year. So while it wasn't surprising to see shares plunge on yesterday's report, it was also no surprise to see iQiyi rebound as Wall Street reflected on its results today.

Steve Symington owns shares of iQiyi. The Motley Fool recommends iQiyi. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

iQIYI, Inc. Stock Quote
iQIYI, Inc.
IQ
$2.88 (9.09%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
331%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.