iQIYI(US:IQ)2024-08-27 10:48Investment Rating - The investment rating for the company is "Buy" with a target price of $3.80, indicating a potential upside of 46.2% from the current price of $2.60 [1][17]. Core Insights - The company's membership revenue is under short-term pressure, leading to a downward adjustment of the full-year revenue and profit expectations [1]. - The second quarter performance met expectations, with total revenue of 7.4 billion RMB, a decrease of 5% year-on-year and 6% quarter-on-quarter, primarily due to a high base from the previous year and weaker performance in key content [2][3]. - Adjusted net profit for the second quarter was 250 million RMB, consistent with expectations, resulting in an adjusted net profit margin of 3% [1][2]. Financial Overview - Total revenue for 2022 was 28,998 million RMB, increasing to 31,873 million RMB in 2023, with a projected revenue of 30,319 million RMB for 2024, reflecting a year-on-year decline of 4.9% [3]. - The adjusted net profit for 2024 is expected to be 1,617 million RMB, with a significant decrease from the previous year [3]. - The company’s earnings per share (EPS) for 2024 is projected at 1.65 RMB, down from 2.91 RMB in 2023 [3]. Membership and Advertising Revenue - Membership revenue in the second quarter decreased by 9% year-on-year to 4.5 billion RMB, while the average revenue per member (ARM) continued to show a growth trend [2][3]. - Advertising revenue for the second quarter was 1.5 billion RMB, a slight decline of 2% year-on-year, but performance in effect advertising remained positive [2][3]. Future Outlook - For the third quarter, despite improvements in key drama viewership data, membership revenue is expected to decline by 13% year-on-year, with a potential recovery in the fourth quarter as new content is released [2][3]. - The company has adjusted its revenue expectations for 2024 and 2025, reflecting ongoing uncertainties in content strategy execution and short-term performance adjustments [2][3].