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On Thursday, Benchmark analyst Fawne Jiang maintained a Hold rating on iQIYI stock, citing the company’s first-quarter results for 2025, which were slightly better than expected. The stock, currently trading at $1.71, has seen significant pressure, dropping nearly 11% in the past week alone. According to InvestingPro data, five analysts have recently revised their earnings estimates downward for the upcoming period. Despite this, iQIYI faces growth challenges, with the company forecasting flat quarter-over-quarter revenue for the second quarter, translating to a 3-4% year-over-year decline.
iQIYI is experiencing difficulties due to slower content adaptation, changing user preferences, and macroeconomic factors, especially in the advertising sector. The company’s revenue declined 8.3% in the last twelve months, though it maintains a healthy gross profit margin of 25.2%. Nonetheless, the company’s strategic efforts to diversify its content through micro-dramas and premium titles have shown early signs of positive progress. These micro-dramas have notably boosted user engagement and are becoming a significant component of iQIYI’s offerings. For deeper insights into iQIYI’s financial health and growth prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, featuring detailed analysis of over 30 key metrics.
However, continued investment in content diversification and the integration of artificial intelligence to enhance user interaction are expected to impact the company’s profit margins in the short term. Despite recognizing the potential of iQIYI’s strategies, the path to sustainable growth is still unclear.
As a result of these factors, Benchmark has revised its projections for iQIYI’s financial year 2025 downward. The firm has decided to maintain its Hold rating on iQIYI stock, pending more definitive signs of the company’s execution capabilities and competitive positioning in the market.
In other recent news, iQIYI reported first-quarter revenue of RMB7.19 billion ($1.11 billion), exceeding analyst expectations of RMB7.1 billion. This marks a 15% increase compared to the same period last year. However, the company’s adjusted earnings per share fell short, reaching RMB0.19 against the projected RMB0.30. The revenue beat indicates growth in iQIYI’s subscriber base and monetization efforts, though challenges remain in converting this growth into profitability. In a related development, CLSA downgraded iQIYI’s stock rating from Outperform to Hold, reducing the price target from $2.40 to $1.70. This decision followed the company’s first-quarter financial results, which matched the downgraded forecasts. CLSA expressed concerns about the clarity of iQIYI’s return on investment and profit recovery trajectory. The downgrade reflects a more cautious approach, suggesting that the shares may not outperform the market in the near term. Investors will likely focus on iQIYI’s spending on content and user acquisition as these factors will be critical for future financial performance.
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