Core Viewpoint - iQIYI, Inc. will report its financial results for the fourth quarter and fiscal year ended December 31, 2024, before the U.S. market opens on February 18, 2025 [1] Group 1: Earnings Conference Call - iQIYI's management will hold an earnings conference call at 6:30 AM on February 18, 2025, U.S. Eastern Time [1] - Participants must register in advance to receive dial-in numbers, passcode, and unique access PIN [2][3] - A telephone replay of the call will be available until February 25, 2025, with specific dial-in numbers provided for international access [4] Group 2: Company Overview - iQIYI, Inc. is a leading provider of online entertainment video services in China, combining creative talent with technology for continuous innovation [5] - The company produces, aggregates, and distributes a wide variety of professionally produced content and other video content in various formats [5] - iQIYI distinguishes itself through its advanced technology platform powered by AI, big data analytics, and proprietary technologies, along with a diversified monetization model [5]

Core Insights - The recent stage adaptation of "Mysterious Lotus Casebook" by iQIYI has received an exceptional response during its multi-city tour, marking a significant achievement in the company's IP development strategy [1][4] - The original series, a martial arts mystery, was a major hit in 2023, achieving a content popularity index exceeding 10,000 and earning a nomination at the 29th Shanghai TV Festival's Magnolia Awards [2] Production and Audience Engagement - The stage adaptation maintains the beloved elements of the original series while offering a fresh theatrical experience, featuring a narrative about a swordsman drawn back into the martial arts world [3] - Innovative stage design combines traditional Chinese aesthetics with modern elements, enhancing audience engagement through cultural motifs [3][4] Commercial Success and IP Expansion - The production has generated significant social media buzz and positive audience reviews, prompting plans for an expanded tour in 2025 [4] - Merchandise sales related to the IP have reached RMB80 million (approximately US$11 million), with over 1,300 SKUs available [5] - The IP has also expanded its offline presence through tourism partnerships, creating immersive experiences at locations like Suyun Thirteen Gardens and Hengdian World Studios [6] Strategic Vision - iQIYI aims to strengthen its premium content offerings and maximize the long-term value of its IPs through diverse offline experiences and consumer touchpoints [7] - The company plans to launch new original IPs and expand established ones in 2025, alongside innovative merchandise and co-branded initiatives [7]

Investment Rating - The report maintains a **Buy** rating for iQIYI (IQ US) with a target price of $2.60, representing a potential upside of **39.8%** from the current closing price of $1.86 [1][3] Core Views - The target price is based on a **10x 2025 P/E ratio**, adjusted from the previous $2.90 to $2.60 due to content supply stability recovery [1] - Membership is expected to gradually bottom out and rebound in 2025, leading to marginal financial improvements [1] - The current valuation is near historical lows at **6.6x 2025 P/E**, making it an attractive investment opportunity [1] - The company's micro-drama layout is progressing steadily, with potential contributions to commercial growth [1] Financial Model Updates - Revenue forecasts for 2024E, 2025E, and 2026E are adjusted to **RMB 29,222 million**, **RMB 28,914 million**, and **RMB 31,233 million**, respectively, with minor downward revisions [2] - Gross profit margins are expected to remain stable at **25%** in 2024E and 2025E, increasing to **27%** in 2026E [2] - Adjusted operating profit for 2024E is revised upward to **RMB 2,353 million**, while 2025E and 2026E forecasts are slightly lowered [2] - Adjusted net profit for 2024E is reduced by **12%** to **RMB 1,494 million**, with further downward revisions for 2025E and 2026E [2] Performance Outlook - Q4 2024 revenue is expected to decline by **14% YoY** to **RMB 6,610 million**, with membership revenue under pressure, declining **15% YoY** [5][6] - Advertising revenue is projected to grow **7% QoQ** in Q4 2024, driven by popular dramas like *I Am a Police Officer* [5] - Adjusted operating profit for Q4 2024 is revised upward to **RMB 397 million**, despite pressure from exchange rate losses [5] Industry and Peer Comparison - iQIYI is categorized under the **entertainment content** sub-sector, alongside peers like Bilibili (BILI US) and Tencent Music (TME US) [12] - The report covers multiple companies in the internet and education sectors, with **Buy** ratings for most, including Baidu (BIDU US) and Pinduoduo (PDD US) [12] Financial Ratios and Metrics - Gross margin is expected to improve from **24.9%** in 2024E to **26.6%** in 2026E [16] - ROE is forecasted to increase from **5.5%** in 2024E to **11.8%** in 2026E, reflecting improved profitability [16] - Net debt-to-equity ratio is projected to decrease significantly from **62.2%** in 2024E to **13.7%** in 2026E [16]

Investment Rating - The report maintains a "Buy" rating for iQIYI, with a target price adjusted to $3.00 based on a 12x P/E ratio for FY2025 [1][2][13]. Core Insights - iQIYI's total revenue for Q4 2024 is expected to decline by 14% year-on-year to RMB 6.6 billion, primarily due to reduced content offerings and a decrease in transaction offset revenue [1]. - The company anticipates a 7% quarter-on-quarter increase in non-GAAP operating profit for Q4 2024, reaching RMB 395 million, attributed to stringent content cost control [1]. - The competitive landscape in the online video market is expected to remain intense, leading to a cautious outlook on revenue and profit recovery for 2025 [1]. Revenue Breakdown - Membership revenue is projected to decline by 15% year-on-year and 6% quarter-on-quarter to RMB 4.1 billion in Q4 2024 [1]. - Online advertising revenue is expected to decrease by 13% year-on-year but increase by 7% quarter-on-quarter to RMB 1.4 billion, driven by brand advertising growth [1]. - Content distribution revenue is forecasted to drop by 20% year-on-year to RMB 404 million, mainly due to a decline in transaction exchange revenue [1]. Financial Projections - Revenue estimates for FY2024 have been revised down by 7%-10%, with total revenue projected at RMB 29.2 billion for FY2024 and RMB 30.0 billion for FY2025 [11]. - The adjusted net profit for FY2024 is expected to be RMB 1.49 billion, with a projected increase to RMB 1.80 billion in FY2025 [3][11]. - The report indicates a projected operating profit margin of 6.0% for Q4 2024, reflecting a 0.9 percentage point increase quarter-on-quarter [2]. Valuation Metrics - iQIYI's current P/E ratio is estimated at 8x based on FY2025 earnings, significantly lower than the industry average of 23x, indicating substantial downside protection [2][13]. - The target price of $3.00 represents a potential upside of 61.3% from the current price of $1.86 [3].

Investment Rating - The report maintains a "BUY" rating for iQIYI, indicating a potential return of over 15% over the next 12 months [1][18]. Core Views - iQIYI's total revenue for 4Q24E is expected to decline by 14% YoY to RMB6.6 billion, primarily due to a light content slate and a decrease in barter transaction revenue [1]. - Non-GAAP operating profit is forecasted to grow by 7% QoQ to RMB395 million in 4Q24E, attributed to stringent content cost control [1]. - The target price has been lowered to US$3.00 based on a 12x FY25E PE, reflecting a more conservative outlook on future revenue and earnings recovery due to intense competition in the online video sector [1][10]. Financial Performance Summary - Revenue projections for FY24E, FY25E, and FY26E have been trimmed by 7-10% [1]. - For FY24E, total revenue is expected to be RMB29.2 billion, with a gross profit of RMB7.2 billion and an operating profit of RMB1.8 billion [8]. - The adjusted net profit for FY24E is forecasted at RMB1.5 billion, with an adjusted EPS of RMB1.6 [8]. Revenue Breakdown - Membership revenue is estimated to decline by 15% YoY to RMB4.1 billion in 4Q24E, while online advertising revenue is expected to decrease by 13% YoY but grow by 7% QoQ to RMB1.4 billion [7]. - Content distribution revenue is projected to drop by 20% YoY to RMB404 million in 4Q24E [7]. Margin Analysis - Gross margin is expected to improve by 2 percentage points QoQ to 24.0% in 4Q24E, driven by fewer barter transactions and effective cost control [7]. - Non-GAAP operating margin is anticipated to expand by 0.9 percentage points QoQ to 6.0% in 4Q24E [7]. Market Position and Valuation - iQIYI's current valuation of 8x FY25E PE offers a significant safety margin compared to peers' average of 23x [7]. - The report highlights the competitive landscape in China's video streaming sector, which is expected to remain intense [1][10].

Core Viewpoint - iQIYI (IQ) is experiencing significant challenges due to macroeconomic headwinds, sluggish consumer spending, and increasing competition from free entertainment platforms, leading to a notable decline in its stock performance and earnings estimates [1][10]. Stock Performance - IQ shares have dropped 42.3% in the last six months, underperforming the Zacks Consumer Discretionary sector's appreciation of 15.1% and the Zacks Film and Television Production and Distribution industry's return of 16.8% [2]. - Compared to peers, IQ has underperformed Bilibili (BILI), Alibaba (BABA), and Tencent (TCEHY), which returned 25.3%, 19.4%, and 14.2%, respectively, in the same timeframe [2]. Earnings Estimates - The Zacks Consensus Estimate for IQ's fourth-quarter 2024 revenues is $916.29 million, indicating a year-over-year decline of 14.33% [3]. - The consensus mark for fourth-quarter earnings is currently 3 cents per share, unchanged over the past 30 days, indicating a year-over-year decline of 70% [3]. - For full-year 2024, revenues are estimated at $4.04 billion, reflecting a year-over-year decline of 7.18% [3]. - The consensus mark for 2024 earnings is pegged at 25 cents per share, unchanged over the past 30 days, indicating a year-over-year decline of 39.02% [4]. Content and Strategic Initiatives - IQ is benefiting from strategic content innovations, tech-driven enhancements, and an expanding global footprint, diversifying its offerings with mini and short dramas alongside long-form videos [6]. - The company has a rich content portfolio, including critically acclaimed hits and audience favorites, reinforcing its market dominance [7]. - A strong content pipeline for 2025 includes anticipated titles that are expected to boost membership and top-line growth, particularly in regions like the U.K., U.S., Japan, and others [8]. - Upgraded interactive features and AI-powered ads are enhancing user engagement and operational efficiency [9]. Competitive Landscape - Despite its strengths, IQ faces significant macroeconomic challenges, including sluggish consumer spending and intense competition from platforms offering free content [10]. - Limited availability of titles in certain genres is creating content supply gaps, affecting membership revenues [10]. - Declining ad revenues and reduced investment in variety shows due to macroeconomic pressures are also impacting top-line growth [11].

Core Insights - iQIYI has announced the return of its "Light On Theater" brand, celebrating its fifth anniversary with seven new suspense-themed titles, reinforcing its leadership in the genre [1][4] - The new lineup includes notable titles such as "Low IQ Crime," "Let Wind Goes By," and "A Life for a Life," showcasing a mix of dark comedy and complex narratives [2][4] - The brand has gained global recognition, with series like "The Bad Kids" and "The Long Night" winning awards, and "Why Try to Change Me Now" being selected for the Berlinale Series [3][6] Company Developments - "Light On Theater" has become a benchmark for suspense storytelling in China since its launch in 2020, with "The Bad Kids" emerging as a cultural phenomenon [4][5] - iQIYI has expanded its genre-based approach with new brands like "Love On Theater" for romance and "Laugh On Theater" for comedy, indicating a commitment to diverse audience preferences [5] - The brand's success has led to a surge in high-quality suspense productions across the industry, establishing suspense as a sought-after genre in Chinese entertainment [4][5] International Recognition - "Light On Theater" has gained popularity in overseas markets, resonating with global audiences through universal themes of human nature [6][7] - The adaptation of "The Bad Kids" into a local version in Japan in 2024 highlights the widespread appeal of iQIYI's content [7]

Core Insights - iQIYI hosted its 10th annual Scream Night event, celebrating exceptional content and creative talent in the entertainment industry [1][2] - The event featured 66 honors across various categories, including drama and variety shows, and was streamed live globally [1][2] Event Highlights - The event included surprise reunions, live performances, and a red carpet, generating significant buzz on social media with over 1,700 trending searches [2] - It solidified its status as one of the most anticipated events in China's entertainment calendar [2] Drama Awards - iQIYI's dramas received multiple prestigious honors, with "Drama of the Year" awarded to "For the Young Ones" and "Fangs of Fortune," while "Mini Series of the Year" went to "To the Wonder" [3] - "Always on the Move" was recognized as "Long Series of the Year," showcasing a variety of engaging narratives [3] Variety Show Awards - "Tendays" won "Original Variety Show of the Year," and "The Rap of China 2024" was honored as "Stage Presentation of the Year" [4] - "Become a Farmer" was named "Most Popular Variety Show," reflecting iQIYI's commitment to social themes like sustainable farming [4] - "The King of Stand-up Comedy" received "Influential Show of the Year," with its winner, Hang FU, named "Comedy Star of the Year" [4] - "Starlight Boys" was recognized as APAC's "Innovative Program of the Year," highlighting iQIYI's influence in the Asian entertainment landscape [4] Film Awards - "Black Storm" was celebrated as Cloud Cinema's "Influential Film of the Year" [4] - Three blockbuster series received special honors for surpassing a popularity index of 10,000, bringing the total inductees to 13 [4] Social Impact Recognition - iQIYI's initiative "Growth Plan Inspired by Movies" was awarded "Social Impact of the Year" for enriching young people's lives through educational film and TV productions [5] - The cast of "Become a Farmer" was recognized for their focus on environmental protection themes, emphasizing the positive societal impact of premium content [5]

Core Viewpoint - The discussions regarding Baidu's potential sale of iQiYi are deemed unnecessary given the recent technological collaboration established between Baidu and iQiYi in the field of AI [1] Group 1 - Baidu has officially initiated a technological collaboration with iQiYi, focusing on artificial intelligence [1]

Core Viewpoint - iQIYI, Inc. reported mixed Q3 results, prompting a detailed analysis of the numbers and future outlook for the company [1]. Financial Performance - The Q3 results were characterized by a combination of positive and negative indicators, suggesting a complex financial landscape for iQIYI [1]. Investment Perspective - The analysis indicates a long-term investment horizon of 5-10 years, emphasizing a portfolio strategy that includes a mix of growth, value, and dividend-paying stocks, with a particular focus on value [1].