New Initiatives Point to a Bullish Case for iQiyi

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When considering high growth stocks, there are a variety of reasons to look at iQiyi, Inc. (NASDAQ: IQ), often referred to as the “Netflix of China.” IQiyi is owned by the so-called “Google of China,” Baidu (NASDAQ: BIDU) and the company has been attracting new consumers quickly. After Q2 2018 earnings announcements, the company reported increasing its subscriber count by a whopping 75%, increasing from 38.3 million subscribers in June of 2017 to 67.1 million subscribers as of June 2018. As is so often the case, U.S-listed Chinese stocks hold the potential for significant market-beating growth. At the same time, however, many are considered to be rife with increased risk, something investors should always keep in mind.

© Mike Hodges

Given recent news of iQiyi’s new partnerships and initiatives, a strong bullish case is starting to form for the Baidu-backed online video platform. While Baidu may be the choice of investors looking to take on less risk, iQiyi shows promise as a potential high- growth stock in the near future. Here’s what investors need to know.

 

Sports Streaming

In a recent release, iQiyi announced the creation of “iQiyi sports,” a new sports media platform launched as a joint venture with Super Sports Media. The partnership is intended to not only help retain subscribers the company already has, but to attract new viewers and subscribers who previously may have been forgoing the platform as a means of entertainment for its lack of sports streaming.

For the “Netflix of China,” the latest move is an important step to gain more subscribers and supercede some of the steps taken by Netflix, Inc. (NASDAQ: NFLX), which does not currently offer subscribers a way to view live sports. With the new partnership, iQiyi Sports will allow users to view soccer, tennis, and golf coverage from agreements with the English Premier League, the UEFA Nations League, the Australian Open, the EFL cup, the ATP Tour, and the WTA Tour.

 

Original Content Creation

Like other online video platforms, iQiyi is improving the way it attracts and retains subscribers by introducing original content. By creating original content, subscribers have an additional incentive to stay with the platform over competitors. Much like the way American video platforms such as Netflix and Hulu have created “Netflix Originals” and “Hulu Originals,” so to has the Chinese powerhouse. Programming like “Tientsin Mystic,” “Burning Ice,” “The Mystic Nine” and “Hot Blood Dance Crew” have helped the platform gain more recognition and viewers.

In news of new partnerships, iQiyi also recently announced a partnership with a blockchain-based cloud supercomputing company, Leonardo Render, which is offering graphical rendering solutions for the content creator and distributor. According to the announcement, iQiyi Director of Production, Jin Min, called the technology a “must have” as it’s anticipated to help the platform streamline parts of the production process. When dealing with a company like iQiyi, new ways of increasing speed and efficiency is crucial for their large subscriber base.

 

Expanding Content and Reach

Lastly, but certainly not least, iQiyi is continuing to expand its global reach to extend beyond Chinese borders. Not only is the company looking to attract wider audiences with its productions outside of China, but it’s also closing deals to include streaming rights to international content as well.

One of iQiyi’s most recent partnership announcements was with India’s Eros International, where a new licensing deal will allow Chinese viewers to watch a catalog of Indian movies by October via Eros Now. China has strict data storage regulations and routinely censors foreign entertainment in the country. Because of that, iQiyi is able to act as a catalyst for international companies looking to gain an audience in the country. Netflix and iQiyi reached a similar deal last year to expand content.

In addition to expanding its catalog of content for viewing, iQiyi is developing content for international viewership too. Starting September 14th, iQiyi’s  film, The Blizzard, is going to be released in select Canadian theaters as a part of its expanded partnership with The H Collective, a Hollywood production company. With the agreement, iQiyi is slated to co-produce or invest in six films distributed in the American and Chinese markets. In the future, be on the lookout for the upcoming xXx 4, the fourth installment in the franchise and a part of the partnership with The H Collective starring Vin Diesel and Roy Wang.

 

The Takeaway

Though each one of iQiyi’s initiatives and partnerships may not all seem interconnected, they provide investors important information. Between attracting new subscribers, retaining current subscribers, and expanding their content and reach outside of China, iQiyi is showing investors that they’re taking aggressive moves to continue growing the streaming platform.

Perhaps more importantly, they’re showing that it works. IQiyi’s membership revenue has increased over 60% year over year and subscriber base continues to grow. If the company can continue to remain on its current path, investors are likely to be happy with the future growth. At the time of writing, even after a decline from its all-time high, IQ remains up 66.81%  all time from it’s IPO price of $18.00, currently trading at $30.36.

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