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Did The Trade War Really Affect IQ’s Plummet In Value?

|Includes: Alibaba Group Holding Limited (BABA), BBY, BIDU, BZUN, CONN, IQ, NFLX, SOGO, TWMC
Summary

What is IQ (IQiyi)?

Has the Trade War had a large affect on the company?

How is IQ actually doing?

Should I invest in IQ in the short run? In the long run?

By now, we’ve all heard about the uproar IQ (IQiyi) has been starting on Wall Street. For those who have not yet, IQ or IQiyi (Pronounced “eye chee”) has been widely called the Netflix of China. On March 29th 2018, the company released 125 million shares at an initial public offering of $18 per share. In less than three months IQ’s share price rocketed 115% up to a whopping $46.23 52 week high. This obviously animated the market and people went senseless. Unfortunately not long after the rise in it’s price did the stock see a large drop-off by nearly 50%. Since the drop the share price has been hovering around the $26-30 area range.

Although there are multiple reasons why the stock has declined at such a heavy rate, many investors believe that IQ will triumph heavily in the long run. A primary reason for not only IQ’s decrease in value but a majority of China’s stocks is President Trumps ambiguous trade war. As soon as the trade war started seeing attention among the media, it seemed as though a lot of American investors pulled out from Chinese stocks, more specifically, Chinese Technology stocks. So how does this affect IQ if IQ only does business within China? A majority of American investors nervous about the trade war started pulling Chinese stocks out of their portfolio’s based off of speculation that the trade war would plummet IQ’s earnings. The company’s price dropped at such a colossal level that more and more investors kept pulling out. So did the trade war actually cause a decrease in the company earnings?

The company is actually doing rather well and the trade war hasn’t really affected the real earnings of the company. According to the Q2 earnings report IQiyi released, they have actually gone from a negative PE ratio to a positive profit of a 11.34 ratio as of late. The only reasonable explanations for any lost earnings among the company concern that of competition among the streaming industry the affected stock price concerns that of the investors high standards for IQ. The company is growing at a large rate and is bringing in a large amount of new subscribers every month and Wall Street sees this but immediately compares the earnings to that of its competitors.

In the short run of the company, investors in IQ may see a seemingly perpetual rise and fall of the stock in indiscriminately minute amounts but in the long run there is no reason why the company wouldn’t be a colossal investment.

Disclosure: All information provided is public knowledge made public by the media and the companies mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with IQ or any other stock that may be mentioned.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.