Why iQIYI's Stock Jumped 23% Higher Today

The giant of online entertainment services in China edged out analyst expectations in the fourth quarter, then followed up with an optimistic view of the next report.

Anders Bylund
Anders Bylund
Feb 22, 2019 at 2:05PM
Technology and Telecom

What happened

Shares of iQIYI (NASDAQ:IQ) soared as much as 22.8% higher on Friday, reaching that peak just after 1 p.m. EST. The China-based online entertainment specialist reported fourth-quarter results after the closing bell on Thursday, edging out Wall Street's consensus estimates with a side order of rosy first-quarter guidance.

So what

iQIYI's revenue rose 55% year over year to $1.0 billion. On the bottom line, net losses grew nearly sixfold to land at $0.70 per American Depositary Share. Your average analyst would have settled for a net loss of $0.71 per share on sales near $983 million.

Looking ahead, management expects first-quarter revenue to land near $995 million. Here, the current analyst view stops at $973 million.

Check out the latest earnings call transcript forĀ iQiyi.

Young Chinese woman watching something on her smartphone, perched on a hilltop.

Image source: Getty Images.

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Now what

The company served 87.4 million subscribers at the end of this quarter, 72% above the year-ago reading. Of these members, 98.5% were paying subscribers to iQIYI's premium services, leaving a minuscule 1.5% with its free or ad-supported options. According to CEO Yu Gong, Chinese consumers are getting used to the idea of paying up for higher-quality entertainment services online.

So it's no surprise to see iQIYI's shares surging on this solid report, especially since it also included optimistic interpretations of China's current consumer trends.