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On Thursday, Citi analysts revised the price target for iQIYI shares, traded on NASDAQ:IQ, to $2.80 from the previous target of $3.00. Despite the reduction, the firm upheld its Buy rating on the stock. The analyst's commentary highlighted iQIYI's strong performance in the fourth quarter of 2024, particularly in December, with dramas "I am Police" and "Under The Skin 2" achieving the top two ranks.
The analysts noted that the short dramas have not yet had a significant impact on the company's financials for the fourth quarter of 2024. Consequently, they maintained their revenue estimate for the period while slightly increasing the adjusted operating profit to RMB 399 million, up from RMB 375 million. This adjustment reflects an improved gross profit margin, which was somewhat offset by increased sales and marketing expenses due to promotional activities.
However, due to the anticipated effects of the Chinese yuan's depreciation, Citi now projects an adjusted net loss for iQIYI in the fourth quarter of 2024, rather than a net profit. Looking ahead into the first quarter of 2025, the analysts expect the competitive environment to remain challenging. iQIYI plans to release several dramas during the Chinese New Year period, with "Moonlight Mystique," which premiered on January 7, already ranking third as of January 15.
In light of these earnings revisions, the price target was adjusted to $2.80. While maintaining a Buy rating, Citi signaled that they foresee limited near-term upside for iQIYI stock until the company releases more blockbuster content.
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