Assessing iQIYI (NasdaqGS:IQ) Valuation as Shares Rebound from a Multi-Year Slide

iQIYI (NasdaqGS:IQ) shares have caught attention recently, moving more than 3% over the past week. Investors might be curious about what is driving the stock’s momentum and how it fits into the streaming landscape.

See our latest analysis for iQIYI.

After a solid run earlier this year, iQIYI’s share price has cooled a bit, though recent weekly gains suggest momentum could be rebounding. Over the past year, investors have seen a total shareholder return of 8.4%. However, this comes after a long-term slide, with total returns over the past three and five years still underwater. That said, the renewed bullishness hints at a shift in risk appetite and some optimism around iQIYI’s long-term strategy, even as the stock remains well below its previous highs.

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With shares still trading well below past highs but showing signs of renewed bullishness, the question is whether iQIYI is undervalued after its recent gains or if the market has already accounted for future growth prospects.

Most Popular Narrative: 10.3% Undervalued

According to the most widely followed narrative, iQIYI’s fair value is estimated above the last close price, suggesting the market may be underestimating near-term potential. This narrative is based on recent regulatory shifts and strategic efforts to expand globally and diversify revenue.

Newly streamlined digital content regulations in China are shortening content production cycles and increasing creator flexibility. This allows iQIYI to bring relevant, diverse content to market more quickly and at lower costs, which should positively impact margins and working capital efficiency.

Read the complete narrative.

Curious what’s fueling this fair value upgrade? It all hinges on improving fundamentals and growth assumptions that could fundamentally alter iQIYI’s profit timeline. What expectations are buried in this narrative? Find out what’s driving analysts’ confidence and see the metrics they’re betting on.

Result: Fair Value of $2.44 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, softer core streaming and ad revenues or setbacks in iQIYI’s content pipeline could quickly undermine bullish analyst assumptions and increase volatility.

Find out about the key risks to this iQIYI narrative.

Another View

Looking beyond the fair value estimate, iQIYI’s price-to-sales ratio stands out at 0.6x. This figure is far below both the US Entertainment industry average of 1.5x and its peer group average of 2.8x. Even compared to the fair ratio of 0.8x, shares look discounted. Does this wide gap mean a hidden opportunity or extra risk?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out iQIYI for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 910 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own iQIYI Narrative

If these views don't quite line up with your perspective or you’d like to dig deeper on your terms, you can easily build your own narrative in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding iQIYI.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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