Why iQiyi Stock Rocketed Higher on Tuesday
What happened
Shares of iQiyi(NASDAQ:IQ)charged sharply higher on Tuesday, surging as much as 39.4%. As of 1:30 p.m. ET, the stock was still up 22.2%.
The catalyst that sent the Chinesestreaming videoplatform higher was its quarterly earnings report that wasfarbetter than expected.
So what
For the fourth quarter, iQiyi generated revenue of 7.39 billion yuan (roughly $1.2 billion), which was essentially flat year over year. The company reported an operating loss of 975.2 million yuan ($153 million), much improved from its loss of 1.3 billion yuan in the prior-year period. This resulted in a loss per share of 0.33 yuan ($0.05).
iQiyi revealed that it had launched a series of cost-cutting initiatives in the fourth quarter and was seeing encouraging results. "We significantly improved our operating and cost efficiency, while maintaining our industry-leading position in terms of various user metrics," said founder and CEO Yu Gong.
The number of average subscribers trended lower, however, falling below the 100 million watermark, clocking in at 97 million, down from 102.7 million in the prior-year quarter. The customer count was also down sequentially from 104.7 million in Q3.
Given the decline in subscribers, it's noteworthy that iQiyi was able to increase the revenue it extracted from its existing customers. The average revenue per user climbed to 14.16 yuan ($2.24), an improvement from 12.45 yuan ($1.97) in the prior-year quarter, and from 13.65 yuan ($2.16) in Q3.
Now what
Management said it expects iQiyi's cost-cutting measures to continue to bear fruit: "For the upcoming first quarter of 2022, we expect to see further significant improvements for both GAAP and non-GAAP operating losses compared with the fourth quarter of 2021."
Investors embraced the news, bidding up iQiyi shares in the process. However, with the number of subscribers continuing to fall, I don't view iQiyi shares as a buy, at least not yet.$iQiyi Inc.(IQ)$
source:The Motley Fool
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