Please ensure Javascript is enabled for purposes of website accessibility

Why iQiyi Stock Dropped Today

By Steve Symington - Jan 24, 2020 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 high-flying Chinese video-streaming site is falling along with the broader market.

What happened

Shares of Chinese video-streaming platform iQiyi (IQ -0.13%) were down 9% as of 1 p.m. EST Friday despite a lack of company-specific news. Rather, it seems today's drop is part of a broader pullback in high-flying China stocks amid growing fears over the fallout of a deadly coronavirus outbreak in the country.

So what

The Shanghai Composite Index lost nearly 2.8% Thursday as the outbreak -- which has already resulted in 17 deaths among 600 confirmed cases -- prompted Chinese government officials to lock down travel to and from several large cities in an attempt to stem its spread. And it certainly doesn't help that, as of yesterday's close, shares of the so-called "Netflix of China" had soared more than 50% from their October 2019 low.

Asia stock market index prices on an LED display.

Image source: Getty Images.

While it's difficult to assess the impact of the virus on China's economy and iQiyi in particular, investors should keep in mind any broader economic slowdown in China could squeeze iQiyi from multiple angles. The company not only relies on the willingness of Chinese consumers to pay modest monthly fees for its premium streaming video content, but also collects a significant amount of online advertising revenue -- around 2.1 billion Chinese yuan of last quarter's 7.4 billion-yuan total -- from a free ad-supported tier of its service.

Now what

In any case, while high-flying tech stocks like these are prone to volatility as the broader markets ebb and flow, you can be sure we'll be watching closely for more concrete perspective on the state of iQiyi's business when the company releases fourth-quarter 2019 results in early February. Depending on both its Q4 performance and management's guidance for the coming year, I suspect investors would do well to prepare themselves for more wild swings in the weeks ahead.

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.
$3.90 (-0.13%) $0.01

*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 service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

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.