Personal Finance

Why iQiyi Inc. Stock Popped Today

Stock market charts indicating gains, overlaying a digital world map

What happened

After plunging on the company's mixed third-quarter report on Wednesday, shares of iQiyi Inc. (NASDAQ: IQ) have all but recouped those losses, rising 12.6% as of 3 p.m. EDT on Thursday after multiple analysts came to the defense of the Chinese video-streaming giant.

So what

For perspective, iQiyi stock dropped more than 11% yesterday after the company confirmed it incurred a $0.63-per-share adjusted net loss -- wider than the $0.43 loss most investors were expecting -- on strong sales of $1 billion (up 48% year over year) in the third quarter.

Stock market charts indicating gains, overlaying a digital world map

Image source: Getty Images.

Following the report, however, at least three analysts weighed in with positive notes on iQiyi. These included an upgrade from neutral to outperform from Credit Suisse 's Thomas Chong, who suggested iQiyi's "core competence remains intact" with "proven success in original content." He also noted iQiyi still enjoys huge potential for increasing its paying customer base, which is expected to grow more than 40% next year to 125 million members.

China Renaissance Securities analyst Ella Ji also reiterated the firm's buy rating in iQiyi, while simultaneously reducing its per-share price target to $28 from $31 -- still a 40% premium from yesterday's close.

And finally, Jefferies ' Karen Chan argued that even though "content costs will likely remain high, [iQiyi's] increased offerings of original content and a slowing of licensed-content cost growth pave the way for optimization."

Chan maintains a buy rating and a $33 price target on iQiyi.

Now what

Incidentally, these comments largely echo those of iQiyi management.

CEO Dr. Yu Gong explained in the company's earnings release late Tuesday: "Leveraging our extensive content offerings and expanding distribution network, we are also continuously improving and diversifying our business monetization. We remain dedicated to applying advanced technology to further enhance our platform and refine our ecosystem to generate long-term growth for shareholders."

Of course, iQiyi has also proven to be a particularly volatile stock since it spun off from parent company Baidu in March, especially given broader weakness in the Chinese markets this year. So while it wasn't surprising to see shares plunge on yesterday's report, it was also no surprise to see iQiyi rebound as Wall Street reflected on its results today.

10 stocks we like better than iQiyi

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and iQiyi wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Steve Symington owns shares of iQiyi. The Motley Fool recommends iQiyi. The Motley Fool has a disclosure policy .

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.

In This Story


Other Topics


Latest Personal Finance Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More