UPDATE: Citi Upgrades iQIYI (IQ) to Buy, 'Earlier Profitability Timing Sustained'
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Citi analyst Alicia Yap upgraded iQIYI (NASDAQ: IQ) from Neutral to Buy with a price target of $5.00 (from $4.50).
The analyst comments "1Q22 total revs of -9% yoy/-2% qoq to Rmb7.28bn broadly in-line with expectations. Due to continued cost optimization efforts, IQ surprised the Street by turning profitable on GAAP and non-GAAP operating and net profit levels a quarter ahead of expectation. Into 2Q22, given further weakening ad budget sentiment, we forecast softer online ad revs of -40% yoy. Nevertheless, with good content quality and resilience after the lockdowns, membership revs maintained relatively steady growth. With disciplined cost control, we expect non-GAAP Op to sustain profitable trends for the rest of 2022. Post estimates revision, we adjust our TP to US$5.60 (from US$4.50) based on 1.0x P/S (vs 0.8x previously) 2023 revs estimate. We expect profitability trends to remain given resilient membership revs and cost control efforts, hence we believe 1.0x P/S is reasonable. With 56% ETR, we upgrade IQiyi to Buy/High Risk from Neutral/High Risk."
Shares of iQIYI closed at $3.58 yesterday.
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