IQIYI, Inc. Sponsored ADR (IQ) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.Analysts' growing optimism on the earnings prospects of this company is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings est ...

iQIYI, Inc. Sponsored ADR (IQ) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy). This rating change essentially reflects an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the system.I ...

Investment Rating - The report maintains a "Buy" rating with a target price of $7.75 [3][4]. Core Insights - The company's Q4 performance met expectations, with steady growth in membership and advertising revenue, and a new high in Average Revenue per Member (ARM) [3]. - Revenue for Q4 2023 reached 77.06 billion RMB, a year-on-year increase of 1%, driven by membership and advertising income [3]. - Adjusted net profit for Q4 2023 was 6.82 billion RMB, with an adjusted net profit margin of 9%, reflecting strong growth across multiple operational metrics [3]. Summary by Sections Financial Overview - The company achieved a Q4 operating profit of 7.4 billion RMB, with an operating profit margin of 10.0%, up 0.7 percentage points quarter-on-quarter [3]. - Adjusted operating profit was 9.28 billion RMB, with an adjusted operating profit margin of 12%, up 0.9 percentage points quarter-on-quarter [3]. Membership Revenue - Membership revenue for Q4 2023 was 48.09 billion RMB, a year-on-year increase of 1%, primarily driven by ARM growth [3]. - The average revenue per member (ARM) reached 15.98 RMB, a year-on-year increase of 9%, marking a new high [3]. Advertising Revenue - Advertising revenue for Q4 2023 was 16.51 billion RMB, a year-on-year increase of 6%, continuing a positive growth trend [3]. - Brand advertising and performance advertising both showed healthy growth, with content-targeted advertising accounting for over 50% of brand advertising revenue [3]. Other Business Segments - Content distribution revenue for Q4 2023 was 5.06 billion RMB, a year-on-year decrease of 21%, mainly due to content distribution scheduling and reclassification of film revenue [3]. - Other business revenue reached 7.41 billion RMB, a year-on-year increase of 13%, benefiting from contributions from third-party collaborations [3]. Profit Forecast - The report adjusts profit forecasts for 2024-2026, expecting adjusted net profits of 37 billion RMB, 47 billion RMB, and 56 billion RMB respectively [3].

Investment Rating - The investment rating for the company is "Buy" with a target price of USD 5.60, indicating a potential upside of 52.6% from the current price of USD 3.67 [2][15]. Core Insights - The company's Q4 2023 revenue was RMB 7.7 billion, slightly exceeding expectations, with a year-on-year growth of 1% and a quarter-on-quarter decline of 4% [2]. - Adjusted operating profit for Q4 2023 was RMB 979 million, which was 3% higher than expectations, resulting in an adjusted operating profit margin of 12% [2]. - The company is experiencing a continuous improvement in Average Revenue per Member (ARM), which increased by 13% year-on-year and 3% quarter-on-quarter, despite a decrease in the number of members [2][7]. Financial Performance Summary - Total revenue for 2023 is projected to be RMB 31.87 billion, with a year-on-year growth of 9.9% [3]. - Net profit for 2023 is expected to reach RMB 2.84 billion, reflecting a significant recovery from a loss in the previous year [3]. - The company anticipates a continued increase in adjusted operating profit to RMB 4.7 billion by 2024, with a corresponding increase in earnings per share [3][13]. Membership and Advertising Insights - Membership revenue for Q4 2023 was RMB 4.8 billion, with a slight year-on-year increase of 1% [2]. - Advertising revenue for Q4 2023 was RMB 1.7 billion, showing a year-on-year growth of 6%, primarily driven by brand advertising [2]. - The overseas market showed strong performance, with a 20% year-on-year increase in overseas advertising revenue, and membership revenue in regions like Japan and Hong Kong growing by over 80% [2]. Cost Management and Profitability - Content costs accounted for 48% of total revenue in Q4 2023, with ongoing efforts to optimize these costs leading to improved gross margins [12]. - The company is expected to maintain a focus on cost control and content optimization, which is anticipated to enhance profitability in the long term [2][12].

Investment Rating - The report maintains a "Buy" rating for iQIYI (IQ.O) with a target price of $6.80 per ADS [2][4]. Core Insights - iQIYI's revenue for Q4 2023 is projected at 7.7 billion yuan, showing a year-over-year increase of 1.5% driven primarily by membership revenue growth. The company anticipates revenue to reach 7.8 billion yuan in Q1 2024 [1]. - The gross margin for Q4 2023 is reported at 28%, with a slight year-over-year decrease of 0.65 percentage points but an increase of 1.06 percentage points quarter-over-quarter. The GAAP net profit for Q4 2023 is expected to be 467 million yuan, reflecting a year-over-year increase of 53.24% [1]. - Membership service revenue for Q4 2023 is 4.8 billion yuan, with a year-over-year growth of 1.37%. The total number of paying members is reported at 100 million, a decrease of 10.13% year-over-year but an increase of 6.7% quarter-over-quarter [1]. - The report highlights a significant increase in user engagement with the launch of six popular series, with participation in membership rewards growing nearly 50% compared to the previous quarter [1]. - Advertising revenue for Q4 2023 is 1.65 billion yuan, up 6.25% year-over-year, although a decrease of 1.42% quarter-over-quarter is expected due to the seasonal nature of advertising [1]. Summary by Sections Financial Performance - Q4 2023 revenue is 7.7 billion yuan, with a year-over-year increase of 1.5% and a quarter-over-quarter decrease of 3.85% [1]. - Q4 2023 gross margin is 28%, with a year-over-year decrease of 0.65 percentage points and a quarter-over-quarter increase of 1.06 percentage points [1]. - Q4 2023 GAAP net profit is 467 million yuan, a year-over-year increase of 53.24% [1]. - Q4 2023 membership service revenue is 4.8 billion yuan, with a year-over-year increase of 1.37% [1]. - Q4 2023 advertising revenue is 1.65 billion yuan, a year-over-year increase of 6.25% [1]. Profit Forecast and Investment Recommendations - The report forecasts GAAP net profits for 2023, 2024, and 2025 to be 1.925 billion, 2.672 billion, and 4.050 billion yuan respectively, reflecting adjustments based on paid user assumptions [2]. - The target price of $6.80 per ADS is based on a 24x P/E ratio for comparable companies [2].

Investment Rating - The report maintains a "Buy" rating for iQIYI, with a target price of $8.03 per ADS, reflecting a 15x PE valuation for 2024 [4][26]. Core Insights - iQIYI's Q4 2023 revenue reached 77.06 billion RMB, showing a year-over-year increase of 1% but a quarter-over-quarter decrease of 4%, slightly above consensus expectations [2][8]. - The company achieved double-digit growth in both membership and advertising revenues for 2023, with membership revenue at 48.09 billion RMB in Q4, and advertising revenue at 16.51 billion RMB [2][11]. - The average revenue per member (ARM) increased to 15.98 RMB/month, marking a 13% year-over-year growth [2][11]. - The adjusted net profit for Q4 was 6.82 billion RMB, exceeding expectations by 29% [2][8]. Financial Performance Summary - Q4 2023 gross margin was 28.2%, with operating profit at 7.74 billion RMB, reflecting a year-over-year decrease of 1% but a quarter-over-quarter increase of 4% [2][8]. - The company expects revenues of 338 billion RMB and 376 billion RMB for 2024 and 2025, respectively, with growth rates of 6% and 11% [2][24]. - Adjusted net profits for 2024 and 2025 are projected to be 36.9 billion RMB and 44.1 billion RMB [2][24]. Revenue Breakdown - Membership revenue accounted for 62% of total revenue in Q4 2023, while advertising revenue made up 21% [11][12]. - The company anticipates membership revenue to grow to 212 billion RMB and 244 billion RMB in 2024 and 2025, respectively [24][25]. - Advertising revenue is expected to reach 67 billion RMB and 69 billion RMB in 2024 and 2025, with growth rates of 8% and 3% [24][25]. Cost Management - Content costs for Q4 2023 were 37 billion RMB, down 5% year-over-year, indicating effective cost control measures [2][20]. - The company continues to focus on original content production, which has helped optimize content costs and improve return on investment [20][26].

Core Insights - The Zacks Rank system emphasizes earnings estimates and revisions to identify winning stocks, with a focus on value investing as a preferred strategy in various market conditions [1] - Value investors utilize fundamental analysis and traditional valuation metrics to identify undervalued stocks [1] - The Style Scores system, particularly the "Value" category, helps investors find stocks with high value grades and strong Zacks Ranks [1] Company Analysis: iQIYI (IQ) - iQIYI currently holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong investment potential [2] - The company's P/B ratio is 2, which is favorable compared to the industry average P/B of 3; IQ's P/B has fluctuated between 1.74 and 7.92 over the past 52 weeks, with a median of 2.97 [2] - iQIYI's P/S ratio is 0.75, significantly lower than the industry's average P/S of 1.12, suggesting it may be undervalued [2] - The P/CF ratio for iQIYI is 6.73, which is considerably lower than the industry average of 17; this ratio has ranged from 2.82 to 10.13 in the past 12 months, with a median of 5.02 [3] - Overall, the metrics indicate that iQIYI is likely undervalued, and its strong earnings outlook positions it as one of the market's strongest value stocks [3]

29 Feb 2024 Earnings Summary CMB International Global Markets | Equity Research | Company Update iQIYI (IQ US) Improving profitability with solid guidance iQIYI (IQ) delivered better-than-feared 4Q23 results with inline topline and upbeat margin. Looking into 1Q24E, we expect both revenue and earnings to see sequential growth, with solid ARM trend. We keep confident on IQ's previous FY24E OP target (at RMB5bn), with disciplined content cost and ARM expansion. Given already-low expectation and clear profitab ...

[Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted 2023 as the best-performing year with record revenues, operating income, net income, and cash flows, emphasizing business resilience and strengthened financial health - CEO Yu Gong stated that 2023 was the company's best-performing year, with **record highs** in total revenues, operating and net income, and cash flows[5](index=5&type=chunk) - Average Revenue per Membership (ARM) grew for **five consecutive quarters**, reflecting the high attractiveness of content and the growing value of membership services[5](index=5&type=chunk) - CFO Jun Wang highlighted that both operating and free cash flows surpassed **RMB 3.3 billion** in 2023, significantly strengthening the company's financial health[7](index=7&type=chunk) [Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) This section provides a high-level overview of iQIYI's financial and operational performance for Q4 and FY2023, presenting key metrics and year-over-year comparisons [Fourth Quarter 2023 Highlights](index=1&type=section&id=Fourth%20Quarter%202023%20Highlights) In Q4 2023, total revenues grew 1% to RMB 7.7 billion, with net income attributable to iQIYI significantly increasing to RMB 466.2 million Q4 2023 Key Financial Metrics (vs. Q4 2022) | Metric | Q4 2023 (RMB) | Q4 2022 (RMB) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | 7.7 billion | 7.6 billion | +1% YoY | | Operating Income | 773.7 million | 783.6 million | -1% YoY | | Non-GAAP Operating Income | 927.8 million | 978.7 million | -5% YoY | | Net Income (attributable) | 466.2 million | 304.3 million | +53% YoY | | Non-GAAP Net Income (attributable) | 682.0 million | 856.4 million | -20% YoY | [Fiscal Year 2023 Highlights](index=1&type=section&id=Fiscal%20Year%202023%20Highlights) For FY2023, total revenues increased 10% to RMB 31.9 billion, with operating income more than doubling to RMB 3.0 billion and net income reaching RMB 1.9 billion Fiscal Year 2023 Key Financial Metrics (vs. 2022) | Metric | FY 2023 (RMB) | FY 2022 (RMB) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | 31.9 billion | 29.0 billion | +10% YoY | | Operating Income | 3.0 billion | 1.3 billion | +128% YoY | | Non-GAAP Operating Income | 3.6 billion | 2.2 billion | +68% YoY | | Net Income (attributable) | 1.9 billion | (136.2 million) | Turnaround to Profit | | Non-GAAP Net Income (attributable) | 2.8 billion | 1.3 billion | +116% YoY | [Fourth Quarter 2023 Operating Highlights](index=2&type=section&id=Fourth%20Quarter%202023%20Operating%20Highlights) In Q4 2023, average daily subscribing members decreased to 100.3 million, offset by a 13% year-over-year increase in monthly ARM to RMB 15.98 - The average daily number of total subscribing members for Q4 was **100.3 million**, compared to **111.6 million** in Q4 2022 and **107.5 million** in Q3 2023[11](index=11&type=chunk) - Monthly Average Revenue per Membership (ARM) for Q4 increased **13%** year-over-year to **RMB 15.98**, up from **RMB 14.17** in Q4 2022[11](index=11&type=chunk) [Detailed Financial Results](index=3&type=section&id=Detailed%20Financial%20Results) This section provides a detailed breakdown of iQIYI's Q4 and FY2023 financial performance, covering revenue streams, costs, expenses, and profitability metrics [Fourth Quarter 2023 Financial Results](index=3&type=section&id=Fourth%20Quarter%202023%20Financial%20Results) In Q4 2023, total revenues rose 1% to RMB 7.7 billion, driven by online advertising growth, while content costs decreased, leading to a 53% increase in net income attributable to iQIYI Q4 2023 Revenue Breakdown (YoY) | Revenue Stream | Q4 2023 (RMB) | YoY Change | | :--- | :--- | :--- | | Membership Services | 4.8 billion | +1% | | Online Advertising | 1.7 billion | +6% | | Content Distribution | 506.1 million | -21% | | Other Revenues | 741.2 million | +13% | | **Total Revenues** | **7.7 billion** | **+1%** | - Content costs decreased by **5%** year-over-year to **RMB 3.7 billion** due to improved content strategy and operational efficiency[15](index=15&type=chunk) - Net income attributable to iQIYI increased by **53%** year-over-year to **RMB 466.2 million**, with diluted net income per ADS at **RMB 0.48**[21](index=21&type=chunk) [Fiscal Year 2023 Financial Results](index=4&type=section&id=Fiscal%20Year%202023%20Financial%20Results) For FY2023, total revenues grew 10% to RMB 31.9 billion, driven by membership and advertising, with operating income surging 128% to RMB 3.0 billion and net income reaching RMB 1.9 billion Fiscal Year 2023 Revenue Breakdown (YoY) | Revenue Stream | FY 2023 (RMB) | YoY Change | | :--- | :--- | :--- | | Membership Services | 20.3 billion | +15% | | Online Advertising | 6.2 billion | +17% | | Content Distribution | 2.5 billion | -4% | | Other Revenues | 2.9 billion | -15% | | **Total Revenues** | **31.9 billion** | **+10%** | - Operating income for FY2023 increased **128%** year-over-year to **RMB 3.0 billion**, with the operating margin expanding from **5%** in 2022 to **9%** in 2023[28](index=28&type=chunk) - The company reported a net income attributable to iQIYI of **RMB 1.9 billion** for 2023, compared to a net loss of **RMB 136.2 million** in 2022[32](index=32&type=chunk) [Financial Statements](index=9&type=section&id=Financial%20Statements) This section presents iQIYI's unaudited condensed consolidated financial statements, including the Income Statement, Balance Sheet, and Statement of Cash Flows, providing a comprehensive view of financial position and performance [Condensed Consolidated Statements of Income/(Loss)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%2F%28Loss%29) The income statement for FY2023 shows total revenues of RMB 31.9 billion, operating income of RMB 3.0 billion, and a net income of RMB 1.9 billion, a significant improvement from the prior year's loss FY 2023 vs FY 2022 Income Statement Highlights (RMB in thousands) | Line Item | Year Ended Dec 31, 2023 (RMB in thousands) | Year Ended Dec 31, 2022 (RMB in thousands) | | :--- | :--- | :--- | | Total revenues | 31,872,651 | 28,997,548 | | Operating income | 2,989,479 | 1,312,421 | | Net income/(loss) attributable to iQIYI, Inc. | 1,925,469 | (136,212) | | Diluted net income/(loss) per ADS | 1.98 | (0.16) | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of December 31, 2023, iQIYI's balance sheet shows total assets of RMB 44.6 billion, total liabilities of RMB 32.4 billion, and total shareholders' equity nearly doubled to RMB 12.2 billion Balance Sheet Highlights (RMB in thousands) | Line Item | Dec 31, 2023 (RMB in thousands) | Dec 31, 2022 (RMB in thousands) | | :--- | :--- | :--- | | Total Assets | 44,594,374 | 46,048,349 | | Total Liabilities | 32,409,459 | 39,704,910 | | Total Shareholders' Equity | 12,184,915 | 6,343,439 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For FY2023, iQIYI generated RMB 3.35 billion in net cash from operating activities and RMB 3.31 billion in free cash flow, a significant turnaround from the prior year Cash Flow Highlights (RMB in thousands) | Line Item | Year Ended Dec 31, 2023 (RMB in thousands) | Year Ended Dec 31, 2022 (RMB in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 3,351,600 | (70,569) | | Net cash used for investing activities | (1,739,515) | 265,980 | | Net cash used for financing activities | (4,285,072) | 4,468,863 | | Free cash flow | 3,314,629 | (244,832) | [Non-GAAP Financial Measures and Reconciliation](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliation) This section explains iQIYI's non-GAAP financial measures, including operating and net income, and provides a detailed reconciliation to comparable GAAP measures, clarifying adjustments - The company uses non-GAAP measures like **non-GAAP operating income** and **non-GAAP net income** to supplement GAAP results, excluding items such as share-based compensation and amortization of intangible assets from business combinations[39](index=39&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) FY 2023 GAAP to Non-GAAP Reconciliation Highlights (RMB in thousands) | Metric | GAAP (RMB in thousands) | Non-GAAP (RMB in thousands) | Key Adjustments | | :--- | :--- | :--- | :--- | | **Operating Income** | 2,989,479 | 3,643,384 | +636,732 (Share-based comp) | | **Net Income (attributable)** | 1,925,469 | 2,838,292 | +636,732 (Share-based comp), +336,226 (Impairment) | | **Diluted Net Income per ADS** | 1.98 | 2.91 | +0.93 (Non-GAAP adjustments) | [Other Information](index=6&type=section&id=Other%20Information) This section provides supplementary information for investors, including earnings conference call details, a corporate profile, and the Safe Harbor Statement regarding forward-looking statements [Conference Call Information](index=6&type=section&id=Conference%20Call%20Information) iQIYI management will host an earnings conference call on February 28, 2024, at 6:30 AM U.S. Eastern Time, with registration and replay details provided - An earnings conference call is scheduled for **6:30 AM U.S. Eastern Time** on **February 28, 2024**[33](index=33&type=chunk) - A live and archived webcast will be available on the company's investor relations website[36](index=36&type=chunk) [About iQIYI, Inc.](index=6&type=section&id=About%20iQIYI%2C%20Inc.) iQIYI is a leading online entertainment video service provider in China, leveraging AI and big data with a diversified monetization model including membership and advertising - iQIYI is a leading online entertainment video service in China, utilizing AI and big data for its technology platform[37](index=37&type=chunk) - The company's monetization model includes membership services, online advertising, content distribution, online games, IP licensing, and more[37](index=37&type=chunk) [Safe Harbor Statement](index=7&type=section&id=Safe%20Harbor%20Statement) This statement cautions that the announcement contains forward-looking statements subject to inherent risks and uncertainties, directing readers to SEC filings for further information - The announcement includes forward-looking statements subject to risks and uncertainties as per the U.S. Private Securities Litigation Reform Act of 1995[38](index=38&type=chunk)

Investment Rating - The report maintains a "Buy" rating for the company [4] Core Views - The company achieved its best annual performance in 2023, with a revenue of 31.87 billion RMB, a year-on-year increase of 9.9% [4] - The company expects profit growth to outpace revenue growth in 2024, with new growth drivers anticipated from overseas business, IP derivative payments, and AIGC [4] Financial Performance - In Q4 2023, the company reported revenue of 7.71 billion RMB, a year-on-year increase of 1.5% and a quarter-on-quarter decrease of 3.9% [4] - The GAAP net profit for Q4 2023 was 466 million RMB, up 53.2% year-on-year but down 2.0% quarter-on-quarter [4] - The non-GAAP net profit for Q4 2023 was 682 million RMB, down 20.4% year-on-year but up 9.6% quarter-on-quarter [4] - The company’s total revenue for 2023 was 31.87 billion RMB, with a non-GAAP net profit of 2.84 billion RMB, reflecting a year-on-year increase of 121% [4] Membership and Advertising - Membership revenue in Q4 2023 was 4.81 billion RMB, a year-on-year increase of 1.4% [4] - The average monthly payment per member reached 16.0 RMB, a year-on-year increase of 12.8% [4] - The company had a total advertising revenue of 6.22 billion RMB in 2023, a year-on-year increase of 16.7% [4] Cost and Efficiency - Content costs in Q4 2023 were 3.7 billion RMB, down 5% year-on-year, with the cost-to-revenue ratio decreasing to 48% [4] - The company maintained a sales and management expense ratio of 12.6% for 2023, a slight increase of 0.6 percentage points year-on-year [4] Future Projections - The report projects non-GAAP net profits of 3.89 billion RMB for 2024 and 4.41 billion RMB for 2025, with corresponding PE ratios of 6.6 and 5.9 [5]