爱奇艺：Short-term headwind continues

Investment Rating - The report maintains a BUY rating for iQIYI, with a target price of US$5.00, reflecting a potential upside of 92.3% from the current price of US$2.60 [4][9]. Core Insights - iQIYI's total revenue for 2Q24 decreased by 5% YoY to RMB7.4 billion, with non-GAAP operating income down by 36% YoY to RMB501 million, attributed to intense competition in the long-form video sector [2][12]. - For 3Q24E, total revenue is expected to decline by 9% YoY to RMB7.3 billion, with non-GAAP operating profit forecasted to drop by 63% YoY to RMB335 million [2][8]. - The forecast for FY24-26E non-GAAP net income has been lowered to RMB1.7 billion, RMB2.5 billion, and RMB2.9 billion respectively, down from previous estimates of RMB2.8 billion, RMB3.3 billion, and RMB4.0 billion [2][8]. Revenue and Profitability - Membership services revenue fell by 9% YoY to RMB4.5 billion in 2Q24, primarily due to underperformance of certain drama series and competition [2][12]. - Online advertising revenue decreased by 2% YoY in 2Q24, with fewer variety shows impacting brand ad revenue, although performance-based ad revenue showed YoY growth [2][12]. - Gross margin dropped by 2.3 percentage points YoY to 23.7% in 2Q24, while non-GAAP operating margin declined by 3.4 percentage points YoY to 6.7% [2][12]. Future Outlook - iQIYI anticipates continued short-term headwinds in 3Q24E, with membership services and online ad service revenue expected to decline by 13% and 17% YoY respectively [2][8]. - The company plans to enhance content targeting the female audience, with upcoming titles expected to improve market share and revenue in the long term [2][8]. - The gross profit margin and non-GAAP operating margin are projected to decline further in 3Q24E to 21.7% and 4.6% respectively [2][8].