iQIYI, Inc. (IQ, HOLD): Maintain HOLD and $2.5 PT

Capital_Insights
2025-10-20

$iQiyi Inc.(IQ)$ - 3Q25 Preview and Model Updates; Maintain HOLD and $2.5 PT

Ahead of iQIYI’s 3Q25 results, we maintain our HOLD rating and $2.5 price target as we fine-tune our estimates.

Specifically, we are lowering our 3Q membership revenue forecast by 1%, now projecting a 4% y/y decline and 2% q/q growth reflecting seasonality.

We are also cutting our 3Q advertising revenue estimate by 4%, now implying a 7% y/y and 2% q/q decline. In total, we now expect 3Q total revenue to be roughly flat q/q and down 9% y/y.

On the cost side, we are raising our content cost estimate by 6% to reflect higher spending during the summer season, but trimming operating expense assumptions given continued marketing discipline.

As a result, our 3Q non-GAAP EBIT forecast decreases by RMB 39M to a loss of RMB 24M (see Figure 1 for details).

Overall, we believe the company continues to face challenges in revitalizing its core long-form video business and identifying new growth drivers.

While we remain constructive on the recent regulatory developments (“广电21条”), we expect the benefits to materialize gradually and note potential uncertainty and execution risks. Maintain HOLD.

Valuation: Our $2.5 (unchanged) price target is based on 20.3x '26E EBITDA of $186M. While 20.3x is lower than NFLX's current '26E EV/EBITDA multiple of 30.5x, we believe the discount is justified by

1) a slower expected '24-'26E revenue CAGR (IQ's -4% vs. NFLX's 14%);

2) uncertainties in revenue growth due to lower content quality consistency and content regulations in China;

and 3) country risk.

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  • Mortimer Arthur
    ·2025-10-21
    Why do some people keep their IQ stock? How can they not see the obvious?

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  • snixy
    ·2025-10-20
    Great insights and analysis here! [Applaud]
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