iQIYI, Inc

iQIYI, Inc (NASDAQ: IQ) is a semiconductor manufacturer. The Company offers a range of mainstream wafer fabrication services and technologies. It manufactures a range of semiconductor devices, including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, and power management units.

Recent Business and Financial Updates

• Revenue and Profitability Performance: iQIYI, Inc. reported total revenues of RMB7.2 billion (USD1.0 billion) for the third quarter of 2024, representing a 10% year-over-year decline. This decrease was attributed to a lighter content slate, reduced membership services revenue, and a 20% drop in online advertising revenue due to a decline in brand advertising activities. However, content distribution revenue rose by 52% year over year, primarily driven by an increase in barter transactions. The company’s operating income declined to RMB238.9 million (USD34.0 million), resulting in an operating income margin of 3%, compared to 9% in the same period of 2023.
• Cost and Expense Management: The total cost of revenues for the quarter was RMB5.6 billion (USD805.1 million), a 3% year-over-year decrease. Content costs, a major component of revenue costs, decreased by 5% due to lighter movie offerings during the quarter. Selling, general, and administrative expenses also declined by 7% year over year to RMB907.9 million (USD129.4 million), primarily reflecting reduced marketing spending. Research and development expenses remained stable at RMB449.0 million (USD64.0 million), demonstrating a consistent focus on innovation and technological advancements.
• Net Income and Earnings Per Share: The company reported a net income attributable to iQIYI of RMB229.4 million (USD32.7 million), a 52% decrease year over year. Non-GAAP net income attributable to iQIYI was RMB479.8 million (USD68.4 million), reflecting a 23% decline from the same period in 2023. Diluted net income per ADS was RMB0.24 (USD0.03), while non-GAAP diluted net income per ADS was RMB0.50 (USD0.07). These reductions were largely influenced by lower revenue and the impact of foreign exchange gains and impairment provisions.
• Cash Flow and Financial Position: Operating cash flow for the third quarter amounted to RMB242.5 million (USD34.6 million), compared to RMB830.7 million in the same period of 2023. Free cash flow stood at RMB234.8 million (USD33.5 million), down from RMB826.5 million in the previous year. As of September 30, 2024, iQIYI held RMB4.7 billion (USD673.8 million) in cash, cash equivalents, and short-term investments. The company’s financial flexibility was bolstered by a USD200 million drawdown under its loan facility in August 2024, bringing the total drawdown under the facility agreements to USD400 million.
• Strategic Initiatives and Outlook: In the third quarter of 2024, iQIYI maintained its leadership in the drama series market share, as reported by Enlightent. The company introduced strategic enhancements, including mini and short dramas to complement its long-form content portfolio, and launched a family account option within its membership programs. CEO Yu Gong highlighted the company's commitment to adapting to evolving user preferences and creating long-term value through disciplined execution and content innovation. These initiatives are expected to strengthen iQIYI's competitive position amid industry volatility.

Technical Observation (on the daily chart):

IQ's stock price is currently hovering close to double bottom support levels of USD 1.90, suggesting a potential reversal and the possibility of an upward movement. The 14-day Relative Strength Index (RSI) is currently near oversold level and below the midpoint, indicating that a pullback may occur, which could set the stage for a rally. In addition, the current price is below both the 50-day and 200-day Simple Moving Averages (SMAs), which may work as medium to long term resistance levels.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Buy’ rating has been given to iQIYI, Inc (NASDAQ: IQ) at the current market price of USD 1.95 as of November 22,2024 at 08:55 AM PST. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is November 22,2024 at 08:55 AM PST. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.