Opened a starter position in iQiyi after-hours

Investment Analysis Clubs Saul’s Investing Discussions
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Despite it being a Chinese company and the problems/risks that can be present with that, I took the plunge (got shares at $18.35).

They reported earnings this afternoon (call is tonight at 9:00 pm):
https://seekingalpha.com/pr/17143578-iqiyi-announces-first-q…

Here are a few of the key things that caused me to go ahead and buy the first shares of any company that I have added within my newly-started Roth IRA. If you aren’t familiar with them, iQiyi is a Chinese company that provides streaming video with a hybrid ad-supported and subscriber model. It is often referred to as the Netflix of China for a quick shorthand. They IPO’ed March 29th, as they had previously been part of Baidu (BIDU). Here’s a recent Seeking Alpha article that I actually have yet to read: https://seekingalpha.com/article/4164677-iqiyi-chill-netflix…

Market Cap at present is about $13.3 billion.
Most recent quarter’s revenue came in at $777.6 million
Year-over-year revenue growth of 57% for this quarter (67% for subscription side; 52% for ad-supported side)
Operating loss margin went from -34% to -22% (trending in the right direction)

Knowing how massive China’s population, having seen what Netflix has done, and being of the opinion that connected TV advertising will be pretty big deal (big part of why I own The Trade Desk), I went ahead and started a small position, with plans to add along the way if the thesis plays out. I think they currently have about 60-something million paying subscribers, compared to a bit more than 100 million for Netflix and the recently-announced 100 million Amazon Prime subscribers…for 2 comparative data points.

volfan84
long IQ (as of today after-hours)

Apologies for bringing a Chinese stock to the board
:slight_smile:

4 Likes
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I have been thinking about it, but got my position in TCEHY instead. What convinced you to take the plunge?

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Had been paying attention for a month or 6 weeks or so after hearing them be mentioned multiple times on Motley Fool podcasts.

Another factor <redacted by the author, who will leave it at that>

The revenue growth, being consistent across both segments, the good direction for margin improvement, and a quick dirty math estimate that included something to the effect of ($777M for this quarter x 4 would be over $3B, market cap is presently only about $13B, so about a 4.0 P/S ratio…with 57% year-over-year growth, which is a double every 1 and a half years if compounded).

Expanding on that rough, dirty math in the parentheses above, let’s extrapolate some revenue numbers (still very dirtily, not assuming any seasonality and simply dividing the growth rate by 4 for a Q-o-Q value). $9 billion of revenue 3 years from now, even assuming growth slowing down to the listed levels. If they can succeed on improving operating leverage, they should be in nice shape.

57%		45%		42%		38%		35%		32%			
1Q2018	2Q2018	3Q2018	4Q2018	1Q2019	2Q2019	3Q2019	4Q2019	1Q2020	2Q2020	3Q2020	4Q2020	1Q2021 
2Q2021
 $777 	 $888 	 $1,014  $1,128  $1,255  $1,387  $1,533  $1,678  $1,838  $1,999  $2,173  $2,347  $2,535 $2,738 
		TTM Rev. $3,807  $4,286  $4,785  $5,303  $5,853  $6,436  $7,047  $7,688  $8,357  $9,054 $9,794
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Sounds like iQiyi and JD.com are starting a service to basically combine their subscriptions and be like Amazon Prime.

http://www.prnewswire.com/news-releases/iqiyi-and-jdcom-anno…

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Here is a Gary Alexander article on iQiyi…title seems like he’s bullish on the quarter (haven’t read it yet).

iQIYI: Great Results Underline Bullish Potential https://seekingalpha.com/article/4167202?source=ansh $IQ

volfan84
Long IQ (iQiyi)