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Why iQiyi, inc. Stock Dropped on Thursday

Steve Symington, The Motley Fool

What happened

iQiyi Inc. (NASDAQ: IQ) stock fell 12.2% on Thursday despite a lack of company-specific news. Rather, with shares of the so-called "Netflix of China" up more than 96% in the month leading up to yesterday's close, today's drop is likely the result of traders taking some of their recent profits off the table.

Man on ladder spray-painting a yellow arrow on a brick wall indicating volatile gains

Image source: Getty Images.

So what

iQiyi shareholders have enjoyed several 10%-plus single-day moves in recent weeks. Some, like today's, came without meaningful news. And others followed encouraging developments such as analyst upgrades, positive comments on iQiyi's long-term vision from CEO Tim Gong Yu, and the start of its offline movie theater expansion. Of course, it likely helps that iQiyi only just held its initial public offering after spinning off from former parent company Baidu in late March 2018, leaving the stock susceptible to more than its fair share of post-IPO hype and volatility.

Now what

That doesn't mean iQiyi won't continue rising from here. Though the company confirmed earlier this month that it now has over 61 million paid subscribers, that's less than half the 125 million claimed by Netflix -- and still a drop in the bucket given the fast-growing middle class within China's population of over 1.4 billion people.

So while it's no fun as a bullish investor to see any given stock pull back so hard, long-term shareholders shouldn't lose any sleep over iQiyi's drop today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends BIDU and NFLX. The Motley Fool recommends iQiyi. The Motley Fool has a disclosure policy.