Entering text into the input field will update the search result below

iQIYI: The Shareholder Value Deterioration Story Continues

Apr. 08, 2021 11:31 AM ETiQIYI, Inc. (IQ)BABA, BABAF, GAIA, TCEHY, TCTZF, NFLX27 Comments

Summary

  • iQIYI's subscriber decline is hard to justify in the current streaming environment. Revenues are about to start declining, according to guidance.
  • Management's guidance was terrible, with the company failing to reaccelerate growth. No tangible plan towards profitability exists.
  • The recent cash raise will further burden current investors, while the company is likely to continue deteriorating shareholder value to stay afloat.
  • Looking for a helping hand in the market? Members of Wheel of Fortune get exclusive ideas and guidance to navigate any climate. Learn More »

For those of you that read my articles regularly, you know that I hardly ever publish bearish ones. Speculating on a company's potential failure is just not something I fancy writing about. It upsets more than it helps investors out, so focusing on companies that offer market-beating potential returns ahead makes more sense to me.

That being said, sometimes a stock's deterioration is so eventual, it is hard to ignore and not talk about it. The stock I want to talk about today is iQIYI (NASDAQ:IQ), for which I have written three bearish articles since last April. In the latest one, I discussed the company's unacceptable subscriber decline and inevitable financial decay amid a never-ending cash burn that is set to dilute investors to oblivion.

Over the past year, investors have traded shares relatively flat, with the stock taking a massive hit a few weeks ago amid getting caught up in a big-block sell-off. While some may view this as a "buy the dip" opportunity, I am writing this article to remind you of the company's unfortunate steady deterioration, which has been materializing over the past year, in line with my past prognostications.

Source: Google Finance

Terrible Performance...

As I have mentioned before, I was really excited when IQ completed its IPO back in 2018. Getting exposure to the "Netflix of China" sounded very exciting. China's economies of scale should be able to lead to sky-high margins that would surely be higher than those of its American peers, much like how we see Alibaba (BABA) and Tencent (OTCPK:TCEHY) be able to achieve. This has not been the case.

IQ's subscriber "growth" has been underwhelming, to say the least. In fact, the subscriber base has been declining. In its latest quarterly report, IQ recorded 101.7 million subscribers, suggesting a 4.86% (from 106.9

Wheel of FORTUNE is a one-stop-shop, covering all asset-classes (common stocks, preferred shares, bonds, options, commodities, ETFs, and CEFs), across all sectors/industries, through single trading-ideas and model-managed portfolios.

The extremely wide scope of the service allows us to cater all types (of investors) and (investment) needs/goals, making WoF a true one-service-fits-all.

Join Wheel of FORTUNE to Increase Your Portion!

This article was written by

Nikolaos Sismanis profile picture
7.47K Followers
One-Stop Shop For Ideas & Portfolios, Covering All Asset-Classes & Sectors

Hi there!

I hold a BSc in Banking and Finance. Here, on Seeking Alpha, I cover a variety of growth stocks and income stocks, including identifying those with the highest expected return potential, and a solid margin of safety.

Currently contributing as Promoting Author to the "Wheel of Fortune" marketplace.

Feel free to contact me at any time, and follow me here on S.A. for regular content and updates!

Happy investing!

Nick


Analyst’s Disclosure: I am/we are long BABA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.