| Valuation method | Value, £ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 0.90 | -56 |
| Intrinsic value (DCF) | 5.16 | 153 |
| Graham-Dodd Method | 0.20 | -90 |
| Graham Formula | n/a |
iQIYI, Inc. (NASDAQ: IQ) is a leading online entertainment service provider in China, operating under the iQIYI brand. The company offers a comprehensive suite of digital entertainment services, including internet video streaming, online games, live broadcasting, online literature, animations, e-commerce, and social media. iQIYI's platform features a vast library of professionally-produced and self-produced content, catering to diverse user preferences. The company generates revenue through membership subscriptions, content distribution, and online advertising. Additionally, iQIYI operates iQIYI Show, a live broadcasting service, and iQIYI Lite, a streamlined video access app. As a subsidiary of Baidu Holdings Limited, iQIYI benefits from synergies with one of China's tech giants. Headquartered in Beijing, iQIYI plays a pivotal role in China's booming digital entertainment sector, which is driven by increasing internet penetration and demand for high-quality content.
iQIYI presents a compelling investment opportunity in China's rapidly growing digital entertainment market. The company's diversified revenue streams, strong content library, and backing from Baidu provide a solid foundation. However, risks include intense competition from domestic and international players, regulatory scrutiny in China's media sector, and high content production costs. The company's negative beta (-0.147) suggests low correlation with broader market movements, which could appeal to investors seeking diversification. With a market cap of $265.5 million and positive net income of $764 million in FY 2024, iQIYI shows profitability potential, though its substantial total debt ($14.2 billion) warrants caution. The lack of dividend payments may deter income-focused investors.
iQIYI operates in China's highly competitive online entertainment sector, where it competes with both domestic giants and international streaming platforms. The company's primary competitive advantage lies in its extensive content library, which includes licensed professional content and proprietary productions. Its integration with Baidu provides valuable user data and cross-platform promotion opportunities. iQIYI's focus on local content resonates strongly with Chinese audiences, giving it an edge over international competitors. However, the company faces challenges from Tencent Video and Youku, which have deeper pockets for content acquisition and production. iQIYI's live broadcasting service (iQIYI Show) differentiates it from pure-play streaming competitors. The company's ability to monetize through multiple channels (subscriptions, ads, IP licensing) provides revenue stability but also exposes it to fluctuations in advertising spending. Content production costs remain a significant pressure point, requiring careful balance between quality and profitability.