On Wednesday, Benchmark analyst Fawne Jiang adjusted the stock price target for iQIYI (NASDAQ:IQ), a leading online entertainment service in China, to $5.00, a decrease from the previous target of $9.00. The firm maintained a Buy rating on the stock despite the revision. The change in the price target reflects concerns ahead of the company's second-quarter 2024 earnings report scheduled for August 22.
The analyst noted that iQIYI faces downside risks in its upcoming quarterly results, primarily due to increased content competition. During the second quarter, key competitors, such as Tencent Video, released multiple popular titles, which appear to have hindered iQIYI's subscriber growth. Moreover, a year-over-year decrease in the number of high-quality variety shows could have negatively impacted advertising growth for the company.
Despite these challenges, the analyst expressed optimism regarding iQIYI's recent content releases in the third quarter, which seem to be gaining traction. However, the unpredictability of content schedules for iQIYI and its competitors has been cited as a factor contributing to potentially uneven growth and low visibility.
In light of the muted consumer sentiment and the dynamic competitive landscape, Benchmark has opted for a conservative stance by lowering their full-year 2024 estimates for iQIYI. The new price target of $5 is a reflection of both the lowered estimates and a reduction in the multiple applied to the company's expected earnings.
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