|Bid||19.03 x 3100|
|Ask||0.00 x 4000|
|Day's Range||18.67 - 19.13|
|52 Week Range||14.35 - 29.18|
|Beta (3Y Monthly)||N/A|
|PE Ratio (TTM)||18.00|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
The challenges facing Chinese streaming video play iQiyi (NASDAQ:IQ) are myriad, and they've pressured IQ stock.Source: natmac stock / Shutterstock.com iQiyi stock has rallied so far this year, gaining 21%, but it's faded of late. Those gains, meanwhile, are coming after the stock hit an all-time low in late 2018.In recent months, at a cheaper price, I've come around to the bull case for IQ stock. In June, I called it the best play for those still bullish on China long-term.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThat's not to say the risks weren't, and aren't, significant. The Chinese economy continues to struggle amid a trade war with the U.S. Competition is intense, most notably from Tencent (OTCMKTS:TCEHY) and Alibaba (NYSE:BABA) unit Youku Toudo. iQiyi still is burning cash as it grows. Majority owner Baidu (NASDAQ:BIDU) is struggling, leading to the possibility of further sales of iQiyi stock.iQiyi's second-quarter report last month seems to highlight, if not increase, those risks. Investors largely have shrugged off the report, as IQ stock trades above where it did before the release. * 10 Stocks to Sell in Market-Cursed September But on this site, Luke Lango argued the report wasn't enough, and I'm inclined to agree. iQiyi still has an intriguing long-term case, but the near-term risk to IQ stock seems to be rising. Growth Slows, but IQ Stock Holds UpFrom a headline standpoint, iQiyi's second-quarter earnings report looks close to disastrous. Revenue growth decelerated dramatically. In Q1, revenue in yuan increased by 43% year-over-year. Growth in Q2 was just 15%.To be fair, there's a key culprit outside of the company's control: the Chinese macroeconomic environment. Advertising revenue declined 16% year-over-year in the second quarter, after a ~flat performance on the same basis in Q1. CEO Tim Gong Yu noted that "a lot of advertisers constrained their advertising budgets," on the Q2 conference call.In the subscription business, iQiyi generated new members toward the end of the quarter thanks to new content. And so membership revenue increased just 38% despite a 50% increase in the quarter-end subscriber count.Both factors are understandable, and indeed the 15% increase was in line with Street estimates. That said, Q3 guidance for revenue growth of just 4-10% suggests a further decline in the top-line growth rate.At the same time, iQiyi's spending isn't going anywhere. Operating loss widened by over 40% year-over-year. Content costs increased by just 7%, but selling and marketing expenses both rose sharply.Perhaps surprisingly, investors saw the quarter as reasonably in line: iQiyi stock only fell 1% the following day. It may be that 50% subscriber growth and decent performance in a tough environment was good enough, particularly given the fact that IQ stock had slid heading into the release. The Risks to iQiyi StockThat said, there are some concerns in the report upon closer inspection. One, in particular, is the fact that subscriber growth came in toward the end of the quarter. As management noted, that boost came as the content was released, which itself is a bit of a concern.The worry is that iQiyi essentially can't stop spending on content, or else subscriber growth slows or stops. It's an echo of the worry facing Netflix (NASDAQ:NFLX), to which iQiyi is often, and somewhat incorrectly, compared.The bullish case for both stocks is that building out a content library with upfront spending will result in enormous cash flow down the line, as that content is monetized. If, however, consumers come to expect more and better content in perpetuity, the hamster wheel never stops spinning. The correlation between content spend and subscriber growth thus is somewhat discomfiting, even at this early stage in iQiyi's growth.The other concern is on the advertising front. Macro weakness is a headwind, to be sure. But iQiyi management also noted an increase in the supply of online advertising inventory, which is pressuring pricing.That's a big risk. Price reductions come off the operating profit line at almost 100%. And the combination of higher inventory and macro concerns suggests ad revenues can be pressured into 2020 at least. Investors hoping for near-term profitability may have to wait longer than they expected. Dented, but Not BrokenTo be sure, Q2 earnings don't break the case for IQ stock. Investors in U.S. markets seem reasonably content with the idea that Chinese companies may struggle for a few quarters. The long-term opportunity, however, still remains.That's true for iQiyi as well. That said, it's hard not to see near- to mid-term risk rising after the second-quarter report. This still is a company with a market cap of over $13 billion, no profitability, and decelerating growth. That's usually a recipe for disaster.Add in the underlying concerns in both the subscription and advertising businesses, and IQ stock at least seems like a candidate for a decline when broad markets stumble. And if Q3 shows further revenue deceleration and wider losses, it may not take a market sell-off for iQiyi stock to start falling again.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Sell in Market-Cursed September * 7 of the Worst IPO Stocks in 2019 * 7 Best Stocks That Crushed It This Earnings Season The post Things Look Precarious for IQ Stock Post Q2 Earnings Disappointment appeared first on InvestorPlace.
iQiyi (NASDAQ:IQ) is China's leading streaming service. It's attracting investors because it is delivering viewers. In fact, over the next two years some analysts project iQiyi's user growth will climb 6.7% to 738 million. Average revenue per user is also expected to climb 8.3% to $17.60 per user.Source: Faizal Ramli / Shutterstock.com This number raises the question of practical growth versus numerical growth. However, in the short term, more users should provide a nice tailwind for IQ stock. But I'm not so sure that iQiyi has the right business model for long-term growth. iQiyi is like Netflix if Netflix Were Owned by AlphabetThe most important caveat when discussing iQiyi is that it is a subsidiary of Baidu (NASDAQ:BIDU), China's leading search engine. iQiyi is seen as a key source of revenue for Baidu (which still owns 58% of IQ) as it attempts to halt a steep skid in its own stock price. So whenever you talk about iQiyi making over 70% from advertising revenue you have to remember that it's Baidu that's generating that revenue.InvestorPlace - Stock Market News, Stock Advice & Trading TipsiQiyi on the other hand makes its revenue through sales of its subscription services and content marketing. Proponents of IQ stock will say that iQiyi currently has about one-half of the Chinese market. But even with only half the market, it still has more users than Netflix (NASDAQ:NFLX). Plus, by keeping subscription costs very low (approximately $3 in U.S. terms), it will have no problem capturing more of the Chinese market. Do Chinese Consumers Really Love Ads?There are U.S. companies (e.g. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB)) that rely on advertising revenue. But that business model is starting to come under attack. Consumers are more aware than ever that the advertising content they receive comes at the expense of their personal privacy. This conflict is being played out in the stocks as investors wrestle with what companies such as Facebook look like with falling advertising revenue. * 7 Stocks to Buy In a Flat Market I have to believe that iQiyi will be facing the same issues. The theory is that China is the leader in e-commerce so it stands to reason that Chinese consumers will be drawn to advertising like a moth to a flame. However, viewing habits in China don't seem to support this theory. A report by digital brand researcher L2 cited that the streaming habits of Chinese consumers revolve around live-streaming events that resemble the QVC network. One of the reasons why Chinese consumers are attracted to this format is because there is no hard sell. It's part infomercial, part reality TV and keeps them more engaged.This isn't to say that iQiyi doesn't have a large user base, but it does suggest that Chinese consumers are not going to pay more for content that includes advertising. They go elsewhere for that. iQiyi Can't Afford to Be NetflixNetflix subscribers pay between $10-$16 for a subscription. With that subscription, they get exactly what they want - - the potential for hours upon hours of uninterrupted viewing. But even though Netflix, which started out as a home delivery service for DVDs, has evolved its business model to incorporate original content, it is still facing two emerging threats. First, original content costs a lot to produce. Second, the two most popular shows on Netflix, "The Office" and "Friends," will no longer be available on the service after 2020.IQ by contrast can afford to keep the price of their subscription low because of Baidu. However, perhaps recognizing the need to give Chinese consumers more variety, iQiyi is still taking on the expense of producing original content. This creates a math problem.Netflix is struggling to remain profitable while charging between three and five times what iQiyi charges their customers. So where is the profit going to come from for iQiyi? Advertising will only take it so far. Eventually, no many how many viewers they deliver, advertisers will expect a return on their investment. But Chinese viewers are already skeptical of traditional advertising, so I'm not sure how that model works long term. The Bottom Line for IQ StockIt wouldn't surprise me if IQ stock rises in the short term as the company expands its user base. However, as much as IQ wants to position itself as the Chinese version of Netflix, investors will need to see a profit and consumers may want to see commercial-free viewing.That presents iQiyi with a trap that I just can't square with long-term success.As of this writing, Chris Markoch did not hold any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 3 Artificial Intelligence Stocks to Buy * 7 Industrial Stocks to Buy for a Strong U.S. Economy * 3 Beaten-Down Bank Stocks to Buy and Hold for the Long Term The post The Numbers Don't Add Up for IQiyi Stock appeared first on InvestorPlace.
Spoiler alert: IQiyi (NASDAQ:IQ) stock has a sustainable rally brewing and the bulls are close to triggering it.Source: Jarretera / Shutterstock.com Wall Street referred to IQ stock in its early days as the Netflix (NASDAQ:NFLX) of China. This was a badge of honor because it meant that IQiyi was in the right business. All content producers have now completely committed to switching their dissemination methods to direct delivery on devices.Netflix proved that the world wants to consume content online. This started the cord-cutting movement and everyone else is in hot pursuit -- but they are still playing catch up to NFLX. Big names like Disney (NYSE:DIS) are at its heels, about to release a new streaming service.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut whenever there is a major shift in a company's methods, there are new opportunities. This allows companies like IQ to carve out their niches in the field. IQiyi provides Netflix-like services in China, and that is a great market to serve because it is massive. So IQ stock's potential is undeniable. The company also has a social media aspect to it where fans can engage with each other about the content.IQ stock came out of the gate like a rocket. Wall Street was smitten with a slew of Chinese IPOs so IQ tripled quickly. But just like many new fad tickers, its sheen faded and the stock corrected hard. IQiyi gave back its entire rally and is now trading inside its initial IPO range. How to Trade IQiyi StockNow that the media frenzy has ebbed, the real opportunities are emerging. In the beginning investors were agog with the concept of Chinese IPOs, but now each company has to trade each on its own merit. * The 8 Worst Stocks to Buy Before the Trade Turmoil Cools Off IQ stock so far appears to be on a decent path, so this is a time for a trade opportunity that could also double as an investment. Usually I require trades to have a tight stop to avoid large losses. But in this case I could make an exception and extend the time commitment.Technically, if IQ stock bulls can beat $19 per share, then they have the opportunity to start a sustainable $3 rally from there. However it is important for them to stay above $17 per share, or they risk retesting recent lows.On the weekly chart, this opportunity is clearest. The price action shows that the range is tight, so with a little help from the general markets, this rally can be a big home run for IQ stock investors.This is not a cheap stock. But for now -- and since the whole industry is still young -- I still consider IQiyi to be a growth company. So for that reason I continue to give it a pass on its profitability metrics. I judge its sales and put less emphasis on its earnings.Moreover, IQ stock sells at only 3.7 times sales which is almost the same as Amazon (NASDAQ:AMZN), and half as expensive as Netflix stock, so it is not outrageously bloated. This is not to say that IQ is cheap. But it is to say that it is miles cheaper than the ridiculous valuations found in cannabis or fake meat stocks. The Bottom Line on IQ StockOfficially, this more of a trading opportunity than an investment thesis for IQ stock. This is especially true because the S&P 500 is within only two percentage points of all-time high. This by definition leaves a lot of froth to come out of the stock market in, general let alone IQiyi stock.Mathematically the upside potential is greater than the downside risk, but success is not a guarantee. There is plenty of room to shed in case of a market-wide correction, even in IQ stock at these low levels.This is a risky trade inside a conservative portfolio. And there are important stock levels to watch that would be short-term triggers. Iqiyi stock is bound by $18.50 above and $17 per share below. A breach of either side would carry momentum in that direction.Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 3 Artificial Intelligence Stocks to Buy * 7 Industrial Stocks to Buy for a Strong U.S. Economy * 3 Beaten-Down Bank Stocks to Buy and Hold for the Long Term The post IQiyi Stock Is Poised to Rally Above $18 appeared first on InvestorPlace.
The premise of iQiyi (NASDAQ:IQ) was lauded in the middle of last year, shortly before and then after the company went public. Though IQ stock stumbled immediately out of the gate, last year's rally from a low near $16 to a peak of above $46 sent a clear message. That is, the so-called Netflix (NASDAQ:NFLX) of China was positioned to sustain its incredible pre-IPO growth pace.Source: Jarretera / Shutterstock.com Everything that could have gone wrong for iQiyi stock did go wrong in the meantime. Shares are presently priced at less than $14 and are lingering fewer than four points from record lows seen at the end of last year.Yes, the impact of newly-imposed tariffs and the ensuing economic headwind played a major part in that pullback.InvestorPlace - Stock Market News, Stock Advice & Trading TipsTake a closer look though. While the economic backdrop has remained uncertain and best and concerning at worst, iQiyi is surviving. In fact, it's thriving. The biggest challenge facing IQ stock is inspiring investors to take notice. A Closer Look at iQiyiIt's often called the Netflix of China, although that's not the best comparison. It's actually more akin to Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) property YouTube, in that it allows users to upload their own video content in addition to the digital content curated by iQiyi. The comparison is particularly more appropriate now that YouTube offers subscription-based access to traditional cable programming and originals. * 7 Deeply Discounted Energy Stocks to Buy Regardless of the most relevant comparison though, two facets about the company have remained largely overlooked during the past few turbulent months. One of them is, there's nothing else in China quite like it. The other is, Chinese consumers increasingly love their iQiyi service.Numbers tell the tale, for investors that care about such details.Take last quarter's headcount for example. As of the end of its second fiscal quarter, the company boasted a little over 99 million paying members, a figure that was up 50% year-over-year. To that end, revenue improved 15% year-over-year, reaching $1.0 billion.It's still bleeding money, which perhaps is the biggest mental hurdle for would-be IQ stock owners. Losses continue to swell too, reaching $339.0 million in the second quarter. Selling and administrative expenses and R&D spending made up a huge amount of its spending growth that led to widening losses.If the pros are right though, this young company is already at the profit turning point. From here, spending should stabilize, but revenue should continue to grow. Click to Enlarge The Near Future and IQ StockThat's a tremendously big "if," of course. iQiyi is still a startup, and doesn't enjoy the deep pockets rival players like Youku-Tudou and Tencent Video have. Tencent Video is a project owned and operated by Tencent (OTCMKTS:TCEHY), while Youku is a subsidiary of eCommerce giant Alibaba (NYSE:BABA).By many measures, however, iQiyi may be better served by operating independently of China's more established digital technology companies.Not unlike Netflix in its infancy, iQiyi doesn't have any other companies standing over its shoulder and scrutinizing every decision it makes. That allows it to lay the proper foundation first, setting the stage for the same kind of market dominance Netflix enjoys in the western hemisphere now. Profits aren't quite the point just yet.IQ stock is also China's only real pure play on the streaming video market, which is something focused investors like. The Bottom Line on IQ StockThe projected fiscal trajectory hasn't changed much since iQiyi's IPO. The only thing that's changed is the market's perception of IQ stock, and even then, the change has been modest. The bulk of the suppressive effort holding iQiyi stock is fear of how investors will view it should China slip into a recession.Even so, it appears investors are slowly but surely warming up to the reality that such a headwind doesn't necessarily have to be damning for iQiyi's growth. In the same vein that low-cost entertainment like that provided by Netflix is seen as even more valuable when times are tough, iQiyi's service is an affordable alternative to pricier entertainment options there.On the flip side, should the trade summit between President Trump and China's President Xi Jinping now scheduled for October lead to a long overdue breakthrough, the subsequent economic recovery could make iQiyi an easily affordable tack-on for its consumers.There's just not a lot of downside with IQ stock, relative to its upside.The trick will continue to be getting others to embrace the idea that entertainment subscriptions are the new norm in China, just like they are elsewhere.As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Deeply Discounted Energy Stocks to Buy * 7 Stocks to Buy In a Flat Market * 10 Stocks to Buy to Ride China's Emerging Wealth The post IQ Stock Is a Good, If Underestimated, All-Weather Holding appeared first on InvestorPlace.
In the latest trading session, iQIYI, Inc. Sponsored ADR (IQ) closed at $18.06, marking a +1.35% move from the previous day.
iQiyi (NASDAQ:IQ) looks as if it might be the next great streaming buy. As more and more content consumers choose to "cut the (cable TV) cord," streaming has become the delivery method of choice for series, movies, and other programming. The streaming king in America at the moment may be Netflix (NASDAQ:NFLX), but enterprising investors might wish to look abroad and consider a position in IQ stock instead.Source: Jarretera / Shutterstock.com Originally spun off of Baidu (NASDAQ:BIDU) and still 58% owned by that company, iQiyi might look like a funny name in the U.S. but it's a dominant streaming brand name in China. (Incidentally, I've come to learn from InvestorPlace's own Dana Blankenhorn that the correct pronunciation is "ee-KWEE-kwi," in case you're curious.)In any case, I consider an allocation in iQiyi stock to be a similar bet on Netflix, but with perhaps more growth potential if you don't mind some downside risk.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Buy IQ Stock for the Subscriber GrowthTo fill in the missing pieces of the iQiyi puzzle, the company's second-quarter reported earnings results are as good a place to start as any. A modest but appreciable 15% increase in year-over-year revenues -- $7.11 billion in Q2 of this year, compared to $6.17 billion in the same quarter of last year (originally reported yuan figures have been converted to U.S. dollars) -- shows that iQiyi's business model is creating slow but steady growth and value for longer-term investors. * 7 Deeply Discounted Energy Stocks to Buy More important than that is subscriber growth, the bread and butter of any streaming service. The second quarter of 2019 proved to be a milestone for iQiyi as the company's subscriber count exceeded 100 million during that time - 100.5 million to be more precise. This was a remarkable 50% increase compared to the same quarter a year prior.Not only that, but iQiyi's revenues from membership services showed an impressive year-over-year increase of 39% during that same time frame; converted from yuan to U.S. dollars, the reported Q2 2019 figure was $497 million. Yu Gong, iQiyi's founder and CEO, remains confident that the upward trajectory in subscriber and revenue growth can continue going forward:We are pleased to report another solid quarter of performance highlighted by our total subscribing members surpassing 100 million… We remain committed to our strategy of enhancing production capabilities of high quality original content and advancing our AI technology innovation in content production, distribution and monetization. Trade-War HeadwindsI believe that the Q2 figures, along with the performance of IQ stock, would have been even better had it not been for the persistent Sino-U.S. trade war, which has taken a toll on both countries' economies. Xiaodong Wang, the CFO of iQiyi, indirectly alluded to this:We achieved continued revenue growth in the second quarter despite some recent challenges facing our industry… We believe our long-term growth landscape remains intact, and we will continue to invest in our original content and technology which serve as the dual engines to drive our future growth.Given the top-line growth which I detailed earlier, I can't help but concur with the CFO's assessment of iQiyi's future.The fact that IQ stock shares are trading at 50% of the price peak seen in June of 2018 is viewed as a drawback to some investors, but I see it as a prime buying opportunity for China's analog to Netflix. I think it's no coincidence that iQiyi stock started to decline right when the trade war started to ramp up. The same tariff conflict that battered the IQ stock price can also precipitate a swift comeback when the trade war is eventually resolved.Besides, I appreciate iQiyi's business model: the company keeps the membership fees super-low at $3 per month (or the yuan equivalent of that amount), while also collecting revenues from the sale of advertisements. This is an added source of revenue that Netflix doesn't collect - and while American Netflix subscribers probably don't like ads too much, I see iQiyi's multiple revenue streams as yet another reason to buy and hold IQ stock. The Takeaway on IQ StockThe fact is, even if you're an American investor, you don't have to buy a pricey stock like NFLX to take a stake in the global streaming phenomenon. Indeed, there's plenty of growth to be had in IQ stock, a cheaper alternative to Netflix shares with some risk, I'll grant, but strong upside potential as well.As of this writing, David Moadel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Deeply Discounted Energy Stocks to Buy * 7 Stocks to Buy In a Flat Market * 10 Stocks to Buy to Ride China's Emerging Wealth The post At This Price, IQ Stock Is a Better, Bolder Bet Than Netflix appeared first on InvestorPlace.
Recessions don't necessarily spell doom for all equity holdings. As I've argued before, some companies, particularly those levered to secular industries, may buffer the storm. After all, everyone has to eat, even during a market downturn. That said, there are certainly investments that are the worst stocks to buy in a trade-war fueled crisis.Of course, any company that depends on China to make ends meet represents a red flag. When the U.S.-China trade war first started, many political observers held hope that the two sides will negotiate a deal.For one thing, Trump supposedly made his fortune through wheeling and dealing. Second, and more importantly, the world's top two economies would incur severe fiscal pain with tit-for-tat tariffs. But with national pride and political reputations on the line, the two have instead escalated the conflict. And that set the tone for the worst stocks you must avoid.InvestorPlace - Stock Market News, Stock Advice & Trading TipsWorse yet, this escalation shows no sign of abating. Just recently, China announced a fresh round of tariffs on $75 billion worth of U.S. goods. Another round of tariffs will occur at the beginning of next month.Not surprisingly, the acrimonious announcement infuriated President Trump. Taking to Twitter (NYSE:TWTR), Trump promised new tariffs to take effect on October 1, impacting $250 billion worth of goods. Instead of the previous 25% tax rate, it will bump up to 30%. Logically, this has bolstered the negative argument for this crisis' worst stocks. * 7 Stocks to Buy Down 10% in the Past Week Just as you would with positive-leaning investments, you shouldn't play games with these worst stocks. Avoid them for now while the trade war rages on. Apple (AAPL)Source: thanat sasipatanapa / Shutterstock.com Although consumer electronics giant Apple (NASDAQ:AAPL) is up big this year, it took a punishing blow last Friday. On that session, AAPL stock dropped nearly 5%. And with that move, shares suddenly don't look so hot anymore. But technical damage isn't the only reason why I think it's one of the worst stocks to engage.First, prior to this trade war escalation, sales of smartphones of all varieties slipped to multi-year lows. Of course, this is a major headwind for all competitors in the space. But for AAPL stock, the underlying company has been attempting to diversify its revenue allocation. So far, this effort has only netted modest results. Overall, Apple's iPhone still represents the lion's share of revenues, and that exposes the company to substantial China risks.Second, with President Trump recently announcing his retaliatory tariffs, the narrative for AAPL stock has worsened. Plus, Trump "ordered" American companies -- via Twitter, of course -- to start making their products in the U.S. I don't take this seriously. However, it does suggest a long trade war ahead of us, which is why AAPL is among the worst stocks to buy right now. Tesla (TSLA)Source: franz12 / Shutterstock.com Shares of Tesla (NASDAQ:TSLA) have been all over the map this year. Throughout most of the first half, TSLA stock skidded off the rails, leaving a wake of disheartened stakeholders. But in July, the equity bounced back, giving embattled shareholders a quick burst of optimism.Unfortunately, it was short lived. TSLA stock plummeted in late July, and the selloff continued throughout most of August. Last Friday, shares dropped 5%, reminding investors why this is one of the worst stocks of 2019.I do believe that Tesla CEO Elon Musk is a genius. But I also know some contrarians are out there waiting to pull the trigger. So if I may offer some advice, I would stay away from TSLA stock during this heightened environment. * 7 Tech Industry Dividend Stocks for Growth and Income Here are two reasons why. First, while electric vehicles (EVs) represent innovative technologies, the infrastructure isn't ready to support their mainstream integration. Second, China is the biggest automotive market in the world. Under such a bitter environment, Tesla really has no chance of penetrating this vital arena. Nio (NIO)Source: THINK A / Shutterstock.com If Tesla is one of the worst stocks to hold against a coming recession, don't expect much from the Tesla of China, more widely known as Nio (NYSE:NIO). On a year-to-date basis, NIO stock is down more than 52%.But like with Tesla above, speculative contrarians are probably licking their lips. No matter what you think about the company or stock, Nio-branded cars are undoubtedly beautiful machines. Combined with their exposure to China's massive automotive market, an economic recovery there would skyrocket NIO stock.Still, I wouldn't get too excited. First, China's automotive sales plummeted to scary levels during the first half of this year. I don't think those losses can just be patched up with some diplomacy. Second, the Chinese government has introduced policies that essentially scale back prior limitations against buying fossil-fueled cars.As I argued previously, that takes away a huge incentive to buy EVs. Additionally, given this platform's new and relatively unproven nature, I'm not too hot on NIO stock. iQiyi (IQ)Source: Jarretera / Shutterstock.com Without recession fears, iQiyi (NASDAQ:IQ) has an interesting narrative. As a Chinese content-streaming company, it naturally draws comparison to Netflix (NASDAQ:NFLX). On paper, iQiyi has 100 million subscribers, with the vast majority of them being paying customers. That in part has supported the bull case for IQ stock earlier this year.But even within a recession, IQ stock has something to offer. As I mentioned in my recent story about Roku (NASDAQ:ROKU), companies that provide cheap entertainment are incredibly relevant during downturns. In both the Great Recession and Great Depression, the movie industry brought smiles and levity to dark circumstances.But will this dynamic benefit IQ stock if we enter a recession? Admittedly, it might do just that. However, I noticed some problems with the iQiyi narrative. One of them is that revenue growth has recently flatlined, which doesn't inspire confidence. * 10 Companies Using AI to Grow Moreover, China is a huge market for content piracy. Thus, if the Chinese want cheap entertainment, they can find it. Under Armour (UA, UAA)Source: 2p2play / Shutterstock.com At the beginning of this month, I mentioned that Under Armour (NYSE:UA, NYSE:UAA) was one of the most shorted stocks. I really should have doubled down and mentioned that it was one of the worst stocks to consider, even as a contrarian. Between the publishing date of my article through August 23, UAA stock dropped 17%.And if you look at the charts since late July, you can see a straight drop down for UAA stock. Of course, most folks will point to the sports apparel-maker's mixed results for its fiscal second-quarter earnings report. At the time, the company pared expected per-share profitability loss, but missed slightly against revenue. However, Wall Street punished UAA stock for its downbeat guidance.But what makes UAA among the worst stocks is its China risks. Let's be blunt. In the U.S., the federal minimum wage is $7.25. Assuming 40-hour weeks, that translates to $1,257 a month. In China, the highest minimum wage is $358 per month.That's a 251% monthly differential that the trade war threatens. And if that goes, I don't think UAA stock stands much of a chance. Adidas (ADDYY)Source: 2p2play / Shutterstock.com Normally, I'd offer an established sports-apparel company like Adidas (OTCMKTS:ADDYY) as a counterweight to Under Armour. But with a possible recession around the corner, I'm very hesitant on ADDYY stock, along with category rival Nike (NYSE:NKE). Ultimately, this trade war doesn't just impact the worst stocks in the U.S. or China; instead, it's a global pressure point.Not necessarily known for subtlety, the Germans laid it out as bluntly as they could: unless some miracle materializes, the country is headed toward recession. And with Germany being the most stable, robust economy of the European Union, that spells trouble for the entire region. In this circumstance, I don't think people will gravitate toward outrageously priced premium-label sneakers. And that makes ADDYY stock a candidate for one of the worst stocks at this juncture. * 7 Tech Industry Dividend Stocks for Growth and Income I'll freely admit that I'm no geopolitical expert. But if I'm interpreting the sentiment at the G7 summit correctly, most nations are tired of the Trump administration. Thus, the trade war threatens to increase its scope. Either way, you should probably sit out ADDYY stock until the coast clears. DR Horton (DHI)Source: Casimiro PT / Shutterstock.com One of the easiest candidates for worst stocks in this potentially arriving recession is DR Horton (NYSE:DHI). Now, I'm not necessarily picking on DHI stock. However, billed as "America's largest homebuilder," I don't have much confidence in the name. After all, buying a new home is the last thing people will be thinking about in an economic downturn.That said, I understand why DHI stock appeals to contrarian thinkers. For one thing, shares have done very well this year thanks to the economic recovery. Secondly, the Federal Reserve has incentivized home purchases through cutting benchmark interest rates.But if this trade war leads to a recession in the U.S., we could see unemployment rise due to layoffs. Naturally, this would inspire belt-tightening actions which aren't conducive for durable acquisitions like real estate. Plus, who'd want to leverage themselves to a mortgage under a shaky economy? For this reason, I'm avoiding DHI stock. Macy's (M)Source: Jonathan Weiss / Shutterstock.com I was recently at one of San Diego's most popular shopping malls when I realized something: it was a Saturday afternoon, yet getting into the parking lot and finding a good spot was remarkably easy. Walking around, I couldn't help but notice that the atmosphere was dead.Granted, my observations are admittedly anecdotal. However, the downturn in brick-and-mortar retail is verifiable, which is why I'm hesitant on Macy's (NYSE:M). Recently, M stock has plunged into absolutely scary depths. Moreover, shares have traded inside an ugly bearish trend channel late July of last year.There are two problems that are weighing on M stock. First, as I mentioned above, foot traffic at shopping centers has been steadily declining. Unfortunately, malls are becoming irrelevant thanks to Amazon (NASDAQ:AMZN) and other e-commerce retailers. * 7 Stocks to Buy Down 10% in the Past Week I might overlook this problem, though, if the trade war wasn't raging. Certain items like clothing and footwear lend themselves to the physical retail platform. However, M stock has serious China risks because that's where many of their products originate. With tariffs causing price hikes, shoppers will move elsewhere.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Buy Down 10% in the Past Week * 15 Retail Survivors to Buy for the Long Run * 7 Stocks That Wall Street Thinks Could Rise 50% Or More The post The 8 Worst Stocks to Buy Before the Trade Turmoil Cools Off appeared first on InvestorPlace.
With just a quick glance of the technical charts, iQiyi (NASDAQ:IQ) appears to be a great bargain. The Chinese entertainment streaming company is back near subterranean levels after soaring briefly to unbelievable heights. In the second half of June, IQ stock closed at $44.20. Against that benchmark, shares have shed over 60%.Source: Jarretera / Shutterstock.com Of course, an equity that has lost that much within a year-and-a-half typically arouses concern, not buyer's anxiety. But the possibility that iQiyi stock can once again reclaim the $40 level has surely danced in speculators' heads. From where we are right now, if IQ hit $40, the move would represent a 131% upswing.Not only that, IQ stock seemingly has exceptional fundamentals. First and foremost, many experts and lay folks talk about iQiyi as being China's Netflix (NASDAQ:NFLX). I don't have to explain the similarities to you: both services are inexpensive, popular with their subscriber base, and incredibly convenient. These two have made watching traditional TV irrelevant.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSecond, IQ released its earnings results for the second quarter of 2019 a week ago. One of the key takeaways was that the subscriber base hit 100.5 million. Better yet, 98.9% of them are paying subscribers. To note, iQiyi has a free viewing options with advertisements, which virtually everyone is avoiding. On the surface, both these factors support the bull case for iQiyi stock. * 7 Tech Industry Dividend Stocks for Growth and Income And this robust sub base segues into perhaps the biggest argument for IQ stock. At just over 100 million subs, this is only about 7% of China's 1.4-billion strong population. If the company can achieve greater penetration, iQiyi stock can fly to unprecedented levels. Potholed Runway Awaits IQ StockAgain, on the surface, the subscriber-growth argument makes sense. Roughly speaking, Netflix has over 60 million U.S. subscribers. Assuming a U.S. population size of 330 million, that amounts to an approximately 18% domestic penetration rate.Therefore, with iQiyi's 7% domestic penetration, iQiyi stock theoretically has plenty of runway. And that's just in terms of a numbers-to-numbers comparison with Netflix. With a population size over four times that of the U.S., iQiyi has exponentially greater potential.But I think this is where the comparison should stop. Actually, it really shouldn't even begin. I say this because China's digital consumer population is probably a lot smaller than you think. And you know I'm going to use this phrase, but yes, this dynamic bodes poorly for IQ stock.For instance, approximately 35% of China's workforce is in agriculture, and for good reason: China feeds 22% of the world's population. In contrast, only 2.5% of American workers ply their trade in agriculture.The percentage differentials here are so vast that it's likely the average Chinese person knows at least one farmer. If we don't include the local farmer's market, most of us don't know anybody in agriculture.I bring this up to remind us that while digitalization is exciting, it hasn't impacted everyone. That's one of the problems facing IQ stock in terms of subscriber growth potential.Another issue is that we can't afford to have China modernize too much. As far as I know, I cannot eat my smartphone. That means the 35% agricultural labor allocation probably won't change much meaningfully, thus limiting the true potential for iQiyi stock.When we talk about iQiyi's sub-growth runway, we should talk about practical potential, not numerical potential. Surely, the company will not convert the lion's share of the population. iQiyi Stock Lacks Brand PowerAlthough bulls were excited about iQiyi's Q2 numbers, in context, I don't find them particularly impressive. For example, Q2 revenue came in at $1.04 billion. That's a modest 7.5% year-over-year lift, especially for a growth stock.And that was one of my arguments against IQ stock when I wrote about the company in July. Simply, growth in top-lines sales has stagnated over the past several quarters. Like Netflix in the U.S. market, iQiyi may have hit a saturation point in China.So, what should the company do? Like similar organizations, iQiyi has been looking abroad for their growth shortfall answers.Here's a nagging question for stakeholders in IQ stock: how many of us can name a modern, relevant Chinese actor or actress? And don't say Jackie Chan because that confirms my point: Chinese media lacks the brand power that Netflix levers via Hollywood.As a result, I don't want to mess around with iQiyi stock. There are several problems here even without worrying about a global recession. But with it, the case just gets worse for IQ.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Tech Industry Dividend Stocks for Growth and Income * 7 Stocks the Insiders Are Buying on Sale * 7 of the Worst Stocks on Wall Street The post A Long but Deeply Potholed Runway Awaits iQiyi Stock appeared first on InvestorPlace.
It’s no question that streaming platforms have revolutionized the way people watch TV, with the shift away from cable and satellite likely to persist in the long-term. According to data from the Motion Picture Association of America, streaming subscriptions reached 613 million worldwide in 2018, an increase of 27% from 2017. When investors think of stocks in this sector, streaming giant Netflix (NFLX) is usually the first to come to mind. That being said, some analysts believe its competitors make more compelling investments as NFLX’s most recent earnings release revealed a substantial drop in subscriber acquisition. With that in mind, let’s take a closer look at 3 streaming stocks to buy instead of Netflix. Walt Disney Company (DIS) The “House of Mouse” caught the Street’s attention with the announcement of its new streaming service, Disney+. With more details being revealed about the platform as we approach its November 12 launch date, the $7-per-month service looks like a steal compared to NFLX’s $16-per-month premium service. Based on the most recent details emerging from its D23 expo this past weekend, investors are liking what they’re seeing. Not only did the company announce its slate of original content including a Lizzie McGuire sequel with Hilary Duff returning, but also provided information about what’s included in a Disney+ subscription. Users will get unlimited downloads on up to ten mobile devices and 4K Ultra HD content resolution. They will also be able to stream on up to four devices at the same time. Tigress Financial analyst Ivan Feinseth argues that management’s continued investment of significant cash in strategic initiatives will pay off in the long-run. “The company's continued accelerating business performance from its strong studio results and expects the ramp of its DTC streaming service to generate increasing return on capital,” he explained. As a result, the five-star analyst reiterated his Buy rating on August 26. The Street remains bullish on DIS. It has a ‘Strong Buy’ analyst consensus and a $156 average price target, implying 16% upside potential. Roku Inc. (ROKU) The streaming player company has seen an impressive run this year. With shares gaining a whopping 367% year-to-date, some analysts say that Roku is still heating up. While the company announced on August 7 that it missed on earnings in its most recent quarter, it’s clear that progress is being made. Revenue from its platform segment grew 86% year-over-year with it now making up 67% of the revenue mix. Investors have the strength of its advertising business to thank for this, with its monetized video ad impressions doubling year-over-year. Roku’s business strategy is a fan favorite as its user base saw a 39% gain from the prior-year quarter to reach 30.5 million active users. One five-star analyst believes the figure is only going to skyrocket. William Blair analyst Ralph Schackart predicts Roku will hit 80 million active accounts by 2025. He adds that Roku is growing at an even faster pace than Netflix did at the same stages of its expansion. As part of its efforts to gain even more control of the $70 billion U.S. television ad market, Roku launched Kids & Family on the Roku Channel, its tool designed to provide an easy way to find tailored content on August 19.Based on all of these factors, Schackart wrote in his August 27 note to clients that he’s keeping his Buy rating and $145 price target on Roku. All in all, positive sentiment surrounds Roku on Wall Street. It has a ‘Moderate Buy’ analyst consensus and a $115 average price target. While the price target does imply downside of 22%, analysts expect Roku to reward long-term investors. Iqiyi Inc. (IQ) Analysts tell investors not to be alarmed by the Chinese online streaming and entertainment company’s recent rocky performance as IQ still remains on the path towards long-term growth. This streaming stock is unique in that its target audience is comprised of people whose primary device is a mobile phone. Its content slate consists of highly interactive shows designed for people using the platform for only short periods of time throughout the day. While IQ reported lackluster second quarter numbers on August 19 that revealed a deceleration of revenue growth and cost increases, investors still have plenty to be excited about. IQ has shifted its focus away from online advertising revenues toward expanding its membership base with original content. Even though this has somewhat weighed down its top-line, its subscription revenue has seen impressive 38% year-over-year growth. Not to mention the company has made progress in its efforts to expand its reach internationally, signing a distribution agreement with Astro Malaysia in June and launching a new joint venture to operate an over-the-top (OTT) streaming service with Indonesia's Media Nusantara Citra in August. All of this played into CLSA analyst Elinor Leung’s decision to reiterate her Buy rating on August 20. Despite lowering the price target from $26.50 to $21, she believes share prices could surge 16% over the next twelve months. The Street remains cautiously optimistic about this streaming stock. IQ has a ‘Moderate Buy’ analyst consensus and a $19 average price target, suggesting 3% upside. Discover the Street’s best-rated stocks with the Top Analysts’ Stocks tool
No Chinese stock excites traders like Iqiyi (NASDSAQ:IQ).Source: Faizal Ramli / Shutterstock.com Iqiyi (pronounced Ee-KWEE-kwi) is a streaming video company focused on people whose primary device is a mobile phone. Its shows are short and highly interactive, perfect for a young worker on their bus ride or coffee break. It is very different from Netflix (NASDAQ:NFLX), although both have intense, passionate CEOs.Iqiyi is a partial spin-off of Baidu (NASDAQ:BIDU), a search engine and cloud that's the weakest of that country's three "Cloud Emperors." Both Iqiyi and Baidu are growing, but Iqiyi's losses remain ahead of expectations.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Marijuana Stocks to Ride High on the Farm Bill For the quarter ending in June Iqiyi lost $339 million, 49 cents per share fully diluted, on revenue of $1 billion. Iqiyi lost almost the same amount during last year's second quarter, but with 33% less revenue. The numbers, and a ton of call options from traders betting on a different result, caused an overnight sell-off of 9%, but IQ stock quickly recovered. Iqiyi Is Not Like NetflixInvestors on Aug. 21 are going to read all about the drop, and less about the recovery.The recovery is based on the paid membership. Subscribers pay just $3 per month. Members also see ads, which they don't do on Netflix. Since IQ users are members these ads can be narrowly targeted.I have written about IQiyi before and questioned its business model. I also warned against buying its sharp rise this spring (which wasn't sustained).More recently, I have emphasized the difference between Iqiyi's model and that of Netflix. It's now No. 1 in the Chinese market, ahead of Tencent (OTCMKTS:TCEHY) and Alibaba (NASDAQ:BABA), whose parent companies are much bigger. Iqiyi Is Like NetflixBut in some ways Iqiyi is a lot like Netflix.As founder and CEO Tim Gong Yu noted in the company's recent earnings call, Iqiyi creates programs in-house that are tailored to its unique audiences, and spends money ahead of the market.Its earliest hits were reality games like "The Rap of China," "The Big Band," and "CZR," all variations of "American Idol." It is now paying more for scripted dramas like "The Thunder," a detective show, "Go Go Squid," a romantic comedy, and "Love and Destiny," a costume epic. Long-term liabilities have doubled, most of them covered by convertible notes.Iqiyi stock was also hit during its most recent quarter by an industry-wide slowdown in the advertising market. Advertising revenue fell 16%. Its subscriber growth depends on getting better wireless infrastructure in smaller Chinese cities. It also needs to keep customers once they get them, reducing churn and marketing costs per subscriber. Iqiyi is hugely popular among young people in China's biggest cities. Gong Yu admitted the company needs to raise its game among older people and those in smaller markets.Unlike Netflix, Iqiyi also has a games business. It recently acquired a game maker called Skymoons. The hope is that Skymoons programmers can deliver games based on Iqiyi shows, and game revenue was up 82% year over year. The Bottom Line on IQ StockIqiyi is still a speculative stock, but it does have a compelling story.Bulls will note that Iqiyi is still growing its customer base and that it has several different ways to monetize - memberships, advertising and gaming services. They will point to CEO Tim Gong Yu, who has his company ahead of rivals backed by much bigger companies. They will brush off losses as the price of growth, over 27% year-over-year for the period from January through June.Bears will question the China story, point to the abundant competition, and note that Iqiyi stock has yet to narrow its losses.Iqiyi is a game for younger, hungrier investors than me. Buy if you're young and can afford a loss, watch it closely, and your patience may be rewarded.Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental story, Bridget O'Flynn and the Bear, available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in BABA. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks to Ride High on the Farm Bill * 8 Biotech Stocks to Watch After the Q2 Earnings Season * 7 Unusual, Growth-Oriented REITs to Buy for Your Portfolio The post Iqiyi: Like Netflix, but Not Like Netflix appeared first on InvestorPlace.
Clearly I was too conservative in my view on iQIYI yesterday. The market has quickly tossed aside any concerns of expenses and losses to focus on subscriber numbers. The subscriber numbers are top-notch while the company needs to get a better handle on expenses.
Chinese streaming TV giant iQiyi (NASDAQ:IQ) -- often dubbed the Netflix (NASDAQ:NFLX) of China -- reported second quarter numbers in late August that weren't all the great. Revenues came in line with expectations, but revenue growth slowed meaningfully from the prior quarter. Profits, meanwhile, missed expectations, as operating losses widened year-over-year amid heavy content spend.Source: Shutterstock In response to the sub-par results, IQ stock dropped.Zooming out, the big picture idea here is that iQiyi's second quarter earnings report wasn't good enough to warrant buying IQ stock. Instead, it didn't ease any of the company's major fundamental issues, and implied that the fundamentals will remain depressed for the foreseeable future.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Mid-Cap Dividend Stocks to Buy Now As such, it is likely that iQiyi stock will remain depressed for the foreseeable future, too.The investment implication? Continue to avoid IQ stock. Fundamental challenges remain, and so long as they do, IQ stock will remain similarly challenged. Second-Quarter Print Wasn't EnoughHeading into the Q2 print, iQiyi had a few big challenges.First, iQiyi's unit economics weren't good, as the company rakes in very little revenue per subscriber but pays out a ton in content and marketing costs per subscriber. Second, iQiyi's revenue growth trajectory had been slowing significantly due to challenges in the company's digital ad business. Third, the company was running wide losses against a slowing growth backdrop.None these challenges were addressed in the Q2 report. Instead, second quarter numbers affirmed that these challenges remain very real.iQiyi's average revenue per user dropped a whopping 23% year-over-year in Q2. To be sure, a bulk of that decline was driven by the tumbling digital ad business. But, excluding digital ad revenues, ARPU still dropped year-over-year. Revenue growth slowed to 15% - from over 40% in Q1 -- and is expected to slow to below 10% next quarter. Operating loss margin widened from -21.5% in the year ago quarter, to -26.3% this quarter.In other words, iQiyi isn't growing unit revenue, is suffering from a slowing growth trend, and the margin profile is deteriorating. That's a losing combo. So long as this losing combo hangs around, IQ stock will remain weak. iQiyi Stock Remains Overvalued Considering Fundamental ChallengesZooming out and seeing the big picture, iQiyi does have healthy long-term growth prospects. But, those long-term growth prospects aren't good enough -- yet -- to warrant an $18 price tag for IQ stock.Broadly speaking, my modeling remains largely similar to what it was before the Q2 print (see the math here). The only big differences are that I'm reducing my long term ARPU outlook slightly given continued negative trends on that front, and that I'm cutting my long term forecast for the digital ad business given macro challenges in the China ad market.Net net, I now think that iQiyi will be able to do about $12 billion in revenues by 2025, with roughly 10% operating margins. That combination makes $1.20 seem like a doable EPS target for iQiyi by 2025. Based on a growth stock average 20-times forward multiple, that implies a fundamentally supported 2024 price target for IQ stock of $24.Discounted back by 10% per year, that equates to a 2019 price target of about $15. That's notably lower than today's price tag. Bottom Line on IQ StockiQiyi is an interesting growth company in China's burgeoning digital economy. But the company also has fundamental challenges: depressed unit economics, a tumbling digital ad business, and weak and deteriorating margins. The second quarter print confirmed that those challenges remain as real today as they've ever been. * 10 Undervalued Stocks With Breakout Potential So long as those challenges hang around, IQ stock will remain weak.As of this writing, Luke Lango was long NFLX. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post Second Quarter Numbers Not Enough for iQiyi Stock appeared first on InvestorPlace.
iQIYI's (IQ) second-quarter 2019 results benefit from subscriber growth and strong content slate. However, decline in online advertising services revenues was a dampener.