Chinese streaming specialist iQiyi (IQ -5.36%) outpaced a rising market this week. Shares jumped 13% through Thursday trading, according to data provided by S&P Global Market Intelligence, compared to a 1% increase in the S&P 500.
The rally only erased a small portion of the negative returns that investors have seen in the past year, though, and the stock remains lower so far in 2022. Still, the boost, which was driven by rising investor enthusiasm in the streaming video industry, was encouraging for shareholders.
iQiyi operates in a different region than stock market streaming peers like Netflix and Roku. It focuses on the Chinese market, which is largely inaccessible to these companies. Yet its stock often moves in concert with these streaming video giants.
That's exactly what happened this week. Netflix shares jumped early in the week as several Wall Street upgrades came following a stock price collapse in January. The subscription video leader also rose due to increased buying from large investors, and from insiders like co-CEO Reed Hastings.
With no news out from iQiyi in the period, the stock's increase this week was likely tied to the rebound in both Netflix and Roku stocks. iQiyi shares had fallen faster than these peers in recent months so it's no surprise that it rose more quickly as sentiment turned positive.
The real test for iQiyi will come over the next few months as management reveals whether its growth rebound strategy is working. The company in mid-November announced sluggish membership gains along with declining advertising revenue. Executives are hoping to improve both these trends throughout 2022, mainly by releasing more high-quality streaming content.
Investors betting on more rallies ahead for iQiyi stock should concentrate on these operating metrics, which will impact the company's sales growth rate. Once revenue trends improve, iQiyi's earnings picture should brighten.