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What's in the Cards for iQIYI (IQ) This Earnings Season?

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iQIYI IQ is set to report fourth-quarter 2019 results on Feb 27.

For the quarter, the company expects total revenues between RMB6.86 billion ($960 million) and RMB7.28 billion ($1.02 billion). The top line is expected be down 2% to up 4% year over year.

The Zacks Consensus Estimate for revenues is currently pegged at $1 billion, indicating a decline of 1.3% from the figure reported in the year-ago quarter.

Moreover, the consensus mark for loss has remained steady at 60 cents over the past 30 days. The company reported a loss of 69 cents in the year-ago quarter.

Let’s see how things have shaped up prior to this announcement.

iQIYI, Inc. Sponsored ADR Price and EPS Surprise

Factors to Watch Out For

iQIYI’s fourth-quarter 2019 revenues are expected to have benefited from content portfolio strength. The top-line performance is likely to reflect strong demand for company-produced drama series, original movies and variety shows.

At the end of the third quarter, total subscribing members were 105.8 million, up 31% year over year. The momentum is expected to have continued in the to-be-reported quarter, primarily owing to content strength.

During the third quarter, interactive ads facilitated greater integration between brands and the users and resulted in a 30% increase in ad impressions. This trend is likely to have continued in the to-be-reported quarter.

iQIYI’s content slate during the fourth quarter included Sword Dynasty, The Great Master, Fearless, FOURTRY and Qing Yu Nian. Apart from its original drama, the company also successfully launched Hot-Blooded Youth and flagship Qipa Talk Season 6 in the to-be-reported quarter.

In October, the company’s next-generation Content Delivery Network, CDN system Qisubo, received the China Computer Federation Science and Technology Award for Outstanding Technology Advances at 2019 China National Computer Congress, the largest and the most respected academic computer science event in China.

However, a waning macroeconomic environment in China and regulatory headwinds are expected to have hurt advertising revenues in the to-be-reported quarter. The advertising business is likely to have been impacted due to business disruptions faced by other ad-driven Internet companies from the coronavirus outbreak.

In the last reported quarter, online advertising service revenues decreased 14% to RMB2.1 billion.  

What Our Model Says

According to the Zacks model, the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP increases the odds of an earnings beat. But that’s not the case here.

iQIYI has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Benefitfocus, Inc (BNFT - Free Report) has an Earnings ESP of +35.48% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Guidewire Software, Inc. (GWRE - Free Report) has an Earnings ESP of +15.38% and a Zacks Rank #2.

Marvell Technology Group Ltd. MRVL has an Earnings ESP of +7.6% and a Zacks Rank #3.

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