Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of iQiyi Dropped Today

By Timothy Green – Feb 28, 2020 at 1:04PM

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

An earnings beat wasn't enough to impress investors.

What happened

Shares of iQiyi (IQ -6.05%) slumped on Friday after the Chinese video streaming company reported its fourth-quarter results. iQiyi beat analyst estimates for both revenue and earnings, but its outlook reflected "substantial uncertainty." The stock was down 9.4% at 12:25 p.m. EST.

So what

iQiyi reported fourth-quarter revenue of $1.1 billion, up 7% year over year and $90 million above the average analyst estimate. The total subscriber base reached 106.9 million, up 22% year over year, with 98.9% of that total paying subscribers.

A declining stock chart.

Image source: Getty Images.

Membership services revenue was $554.6 million, up 21% year over year; online advertising services revenue was $270.5 million, down 15% due to the economic environment in China; content distribution services revenue was $126.1 million, up 68%; and other revenue was $125.6 million, down 21%.

Net loss per ADS was $0.49, beating analyst expectations by $0.13. Cost of revenues exceeded revenues during the quarter, although that spending was down on a year-over-year basis.

"Facing the dawn of a new decade, we look forward to the enormous opportunities ahead of us with the approaching 5G commercial adoption and continuous AI technology innovation. We believe the rising willingness of Chinese users to pay for premium content combined with their access to more convenient payment methods, will create significant potential for our business," said CEO Dr. Yu Gong.

Now what

For the first quarter, iQiyi expects to produce revenue between $1.02 billion and $1.08 billion, up between 2% and 8% from the prior-year period. The company said this outlook reflects substantial uncertainty.

While iQiyi's results were favorable compared to expectations, guidance didn't impress. With the broader market continuing to decline on Friday, there just wasn't enough good news to push the stock higher.

Timothy Green has no position in any of the stocks mentioned. 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
$2.71 (-6.05%) $0.17

*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
342%
 
S&P 500 Returns
107%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

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.