iQIYI, Inc. (NASDAQ:IQ) Could Be Less Than A Year Away From Profitability
iQIYI, Inc. (NASDAQ:IQ) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. iQIYI, Inc., together with its subsidiaries, provides online entertainment services under the iQIYI brand in the People’s Republic of China. The US$5.5b market-cap company posted a loss in its most recent financial year of CN¥6.2b and a latest trailing-twelve-month loss of CN¥2.2b shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which iQIYI will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
See our latest analysis for iQIYI
Consensus from 22 of the American Entertainment analysts is that iQIYI is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of CN¥942m in 2023. So, the company is predicted to breakeven approximately a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 90%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, we won’t go into details of iQIYI's upcoming projects, but, take into account that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with iQIYI is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.
Next Steps:
There are key fundamentals of iQIYI which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at iQIYI, take a look at iQIYI's company page on Simply Wall St. We've also put together a list of relevant factors you should further examine:
Valuation: What is iQIYI worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether iQIYI is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on iQIYI’s board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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