iQIYI: A Lack Of Surprises

Core Viewpoint - iQIYI, Inc. shares are rated as a Hold, with Q2 2024 results aligning with market expectations, and no significant surprises anticipated for Q3 2024 [2][5][6] Q2 Performance Summary - iQIYI's Q2 2024 revenue was RMB 7,438.8 million, slightly above the consensus estimate of RMB 7,415.9 million, reflecting a YoY decline of -4.7% [4] - Non-GAAP adjusted EPS for Q2 2024 was RMB 0.25, consistent with prior predictions [4] - Operating margin for Q2 2024 was 4.6%, down from 11.9% in Q1 2024 and 7.8% in Q2 2023 [4] - Operating expenses decreased by -1.3% YoY to RMB 7,096.7 million, helping to mitigate the decline in operating profit [4] Competitive Landscape - iQIYI faces ongoing competitive pressures from both short-form video platforms and within the long-form video sector, impacting revenue performance [4][6] - The company acknowledged fluctuations in drama market share and membership numbers, which are influenced by new content [6] Q3 Outlook - Q3 2024 results are expected to show a more severe top-line contraction of -9.0% YoY, with no positive surprises anticipated [6] - The company plans to focus on expanding membership rather than immediate profitability, which may involve discounting subscription prices [6] Valuation and Future Prospects - iQIYI shares are considered reasonably valued, with a forward P/E of 9.6 times and a projected normalized EPS CAGR of +7.4% from FY 2023-2026 [7] - The outlook for Q3 2024 indicates a lack of meaningful turnaround in financial performance [7]