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ASEAN (Indo) & China-focused. Ex-Deputy HoR UBS.

Johannes Salim, CFA

Equity Bottom-Up

<ul><li>Management conference call reveals that <a href="https://www.smartkarma.com/entities/26755" target="_blank" data-smartkarma-citation="entities:26755:1">iQIYI Inc (IQ US)</a> sees itself as "Netflix Plus".</li><li>Our penetration rate analysis suggests that subs could grow by 30% CAGR next few years.</li><li>The path to profitability lies in higher ARPU/pricing power (and a larger scale to a smaller extent), and our projection is that IQ would post a small profit only in 2021.</li><li>IQ trades at 3.8x 2018 P/S, a 16% discount to its closest global comp, <a href="https://www.smartkarma.com/entities/26772" target="_blank" data-smartkarma-citation="entities:26772:1">Spotify Technology SA (SPOT US)</a>.  </li></ul>

Management conference call reveals that iQIYI Inc (IQ US) sees itself as "Netflix Plus".Our penetration rate analysis suggests that subs could grow by 30% CAGR next few years.The path to profitability lies in higher ARPU/pricing power (and a larger scale to a smaller extent), and our projection is that IQ would post a small profit only in 2021.IQ trades at 3.8x 2018 P/S, a 16% discount to its closest global comp, Spotify Technology SA (SPOT US).  

IQIYI: Is There A (Clear) Path to Profitability?