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On Thursday, CLSA analysts revised their outlook on iQIYI stock, downgrading the rating from Outperform to Hold. The move came alongside a reduction in the price target, now set at $1.70, a decrease from the previous $2.40. Currently trading at $1.71, InvestingPro analysis suggests the stock is undervalued, despite the company’s $1.65 billion market capitalization. The decision by CLSA follows iQIYI’s first-quarter financial results for the year 2025, which matched the downgraded forecasts.
iQIYI’s adjusted EBIT for the first quarter was reported at Rmb459 million, marking a 13% quarter-over-quarter increase and surpassing estimates by 9%. The stock has faced significant pressure, with InvestingPro data showing a -65.45% return over the past year and a recent -10.94% decline in just the last week. Despite this performance, the company’s management anticipates adjusted EBIT to break even in the second quarter of 2025. This forecast falls short of the Visible Alpha consensus, which had predicted Rmb564 million. The shortfall is attributed primarily to heightened expenditures on content, promotion, and user acquisition efforts for the company’s mini-drama application.
The revised price target by CLSA is based on a discounted cash flow (DCF) analysis, which has been adjusted in light of the recent financial updates. The analysts at CLSA expressed concerns regarding the reduced clarity in the return on investment and the trajectory for profit recovery at iQIYI. This uncertainty has led to the downgrade in the stock rating to Hold. According to InvestingPro, the company maintains a 25.21% gross profit margin and generated $278.22 million in levered free cash flow over the last twelve months. Get access to 13 additional exclusive ProTips and comprehensive financial analysis in the Pro Research Report.
The new price target of $1.70 reflects the updated valuation and the analysts’ assessment of the company’s financial outlook. The downgrade from Outperform to Hold suggests a more cautious approach to the stock, indicating that the analysts no longer see the shares outperforming the market in the near term.
Investors and market watchers will be keeping a close eye on iQIYI’s future financial performance, particularly in relation to its content spending and user acquisition strategies, as these factors will likely play a critical role in the company’s ability to meet its financial targets and improve profitability.
In other recent news, iQIYI reported its first-quarter revenue, which exceeded analyst expectations, highlighting the company’s ongoing growth. The Chinese streaming platform posted revenue of RMB7.19 billion ($1.11 billion), surpassing the consensus estimate of RMB7.1 billion and marking a 15% increase compared to the same quarter last year. However, the company’s adjusted earnings per share fell short, coming in at RMB0.19, missing analyst projections of RMB0.30. These developments suggest that while iQIYI is successfully expanding its subscriber base and monetization efforts, it still faces challenges in converting this growth into profitability. The company’s performance in the competitive streaming market in China remains a focal point for investors. As the streaming landscape continues to evolve, iQIYI’s revenue growth and profitability are key metrics that will be closely monitored.
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