Technology

IQiyi, China's 'Netflix', Has Upside, Analyst Says

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Chinese streaming company iQiyi picked up a new fan on Wall Street, but macroeconomic issues in China are weighing on the stock.

Jefferies analyst Karen Chan began coverage of iQiyi with a Buy rating and $33 target price late Sunday, writing of big opportunities for the so-called Netflix of China. IQiyi is an online video platform that was spun out of Baidu in March.

Chan has faith in the company's original-content efforts. "As original content becomes more quality- than quantity-driven, iQiyi should benefit with a proven track record," she wrote. The company's spending on content will probably stay high, but she thinks it can benefit from a "rising mix" of original shows, as well as slowing cost growth for licensed programming.

She also sees big secular opportunities for iQiyi. Chinese consumers are moving away from traditional TV and toward online platforms, and iQiyi is the leading player, Chan says. Internet-based video platforms tend to be "under monetized" relative to their traditional, or linear, counterparts, she wrote, which leaves ample room to close the gap.

Despite the upgrade, iQiyi shares were off 0.9% in premarket trading Monday amid more general pain for Chinese stocks. On Sunday, the People's Bank of China tweaked its reserve requirements for commercial banks in the country in an effort to ignite economic growth amid trade-war concerns. Shares of other tech companies including Alibaba, JD.com, and video-sharing platform Bilibili were down more sharply than iQiyi's stock.

IQiyi was a high flier in the months immediately after its March IPO, but the shares have given back some of those gains. The stock closed Friday at $25.49 and is up about 42% from its IPO price of $18, but it is still way below its high of $46.23.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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