iQIYI (IQ Quick QuoteIQ - Free Report) shares have dropped 42.3% in the last six months, underperforming the Zacks Consumer Discretionary sector’s appreciation of 15.1% and the Zacks Film and Television Production and Distribution industry’s return of 16.8%.

IQ shares have also underperformed peers like Bilibili (BILI Quick QuoteBILI - Free Report) , Alibaba (BABA Quick QuoteBABA - Free Report) and Tencent (TCEHY Quick QuoteTCEHY - Free Report) , which have returned 25.3%, 19.4% and 14.2%, respectively, in the same time frame.

IQ’s subpar performance can be attributed to macroeconomic headwinds, sluggish consumer spending and increasing competition from free entertainment platforms.

IQ’s Earnings Estimates Indicate YoY Decline

The Zacks Consensus Estimate for IQ’s fourth-quarter 2024 revenues is pegged at $916.29 million, indicating a year-over-year decline of 14.33%.

The consensus mark for fourth-quarter earnings is currently pegged at 3 cents per share, unchanged over the past 30 days, and indicating a year-over-year decline of 70%.

The Zacks Consensus Estimate for IQ’s full-year 2024 revenues is pegged at $4.04 billion, indicating a year-over-year decline of 7.18%.

The consensus mark for 2024 earnings is currently pegged at 25 cents per share, unchanged over the past 30 days, and indicating a year-over-year decline of 39.02%.

IQ's earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, were in line in one quarter and missed once, the average surprise being 22.92%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Innovative Content & Global Expansion Aid IQ’s Prospects

IQ has been benefiting from strategic content innovations, tech-driven enhancements and an expanding global footprint. It has diversified its offerings by integrating mini and short dramas along with long-form videos to cater to evolving viewer preferences.

IQ boasts a rich content portfolio that includes dramas, movies, variety shows and animations. Critically acclaimed hits like Strange Tales of Tang Dynasty and For the Young Ones underscore its storytelling strength, while audience favorites like The King of Stand-Up Comedy and How Dare You? reinforce its market dominance.

IQ has a strong content pipeline slated for release in 2025, including highly anticipated titles like The Boy Next World, The White Olive Tree, The Best Thing, A Moment But Forever and Moonlight Mystique.

The rising global popularity of C-dramas is boosting IQ’s membership and top-line growth in regions like the U.K., the United States, Japan, South Korea, Brazil, Mexico, Australia, Hong Kong and Thailand.

Upgraded interactive features, AI-powered ads with improved CPM (Cost Per Mille) and virtual production capabilities are boosting user engagement and operational efficiency.

Fierce Competition Hinders IQ’s Growth

Despite its strengths, IQ has been facing significant macroeconomic challenges. Sluggish consumer spending and intense competition from diverse entertainment options are weighing on IQ’s growth. Competing platforms offering free content pose serious headwinds.

The limited availability of titles in genres like female-oriented costume dramas is creating content supply gaps and affecting membership revenues.

Furthermore, declining ad revenues and reduced investment in variety show under macroeconomic pressures is also affecting top-line growth.

What Should Investors Do With IQ Stock?

While IQ’s innovative content strategies and increasing global footprint hold promise, macroeconomic challenges, fierce competition and declining ad revenues require a more cautious approach to its stock heading into 2025.

IQ currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.