iQIYI(US:IQ)2024-11-24 02:43Investment Rating - The report maintains a "Buy" rating for iQIYI (IQ US) with a target price adjusted to $2.90, reflecting a potential upside of 43.6% from the current price of $2.02 [1][3][22]. Core Insights - iQIYI's membership revenue is expected to remain under pressure, with a projected decline of 13% year-on-year and 5% quarter-on-quarter in Q4 [1]. - Advertising revenue may see slight growth due to seasonal factors, while content distribution revenue is anticipated to drop by 20% year-on-year [1]. - The report emphasizes the importance of micro-short dramas in enhancing user engagement and retention, despite the competitive landscape and content homogeneity [1]. - The strategic focus includes optimizing content production and operations, with a shift towards high ROI content and increased investment in micro-short dramas [2]. Financial Forecast Adjustments - Revenue and profit forecasts for 2024 and 2025 have been revised downwards due to ongoing uncertainties in content performance and membership pressures [1]. - The new revenue forecast for 2024 is set at RMB 29,244 million, a decrease of 3% from previous estimates [4]. - The adjusted operating profit for 2024 is projected at RMB 2,307 million, reflecting a 7% reduction from earlier predictions [4]. Quarterly Performance Overview - For Q3 2024, total revenue is reported at RMB 7,246 million, continuing a downward trend with a 10% year-on-year decline [15]. - Paid membership numbers decreased to 4,366 million, down 13% year-on-year, while online advertising revenue fell by 20% to RMB 1,337 million [15]. - The operating profit margin for Q3 2024 is noted at 3%, significantly lower than previous periods, indicating challenges in maintaining profitability [15]. Market Position and Trends - iQIYI's market capitalization stands at approximately $1.06 billion, with a significant decline of 58.61% year-to-date [1]. - The report highlights the competitive nature of the industry, stressing that long-term success will depend on content quality and innovation [1][2].