What’s iQiyi’s position in the video streaming market?
iQiyi (IQ) is China’s leading online video platform and known as the Netflix (NFLX) of China. It spun off from Baidu (BIDU), China’s technology company, and conducted its IPO in March. Baidu holds a 70% stake in iQiyi.
Tencent Holdings’ Tencent Video, Baidu’s iQiyi, and Alibaba Group Holdings’ Youku Tudou are the major OTT (over-the-top) video streaming players in China. OTT content refers to audio and video content distributed through the Internet.
China’s video streaming market is projected to be worth $17.6 billion by 2020. The worldwide video streaming market has been projected to grow at a 17% CAGR (compound annual growth rate) of $82 billion between 2017 and 2023. Some of the market’s global players include Netflix, Amazon Web Services (AMZN), Facebook (FB), Apple (AAPL), and Google (GOOGL). eMarketer expects Youku to surpass iQiyi by 2019 after securing the rights to stream the 2018 FIFA[1. Fédération Internationale de Football Association] World Cup. About 229 million people in China are expected to use the subscription streaming service. Higher Internet connectivity and the popularity of Internet entertainment is expected to lead more than 25% of China’s population to opt for the OTT service by 2022.
iQiyi stock has risen 95.4% since its IPO and recently traded at a 36% discount to its 52-week high. The stock value returns have beaten the Nasdaq Composite Index and the S&P 500 Internet Software & Services sector. Two of the analysts covering iQiyi stock have given it a “strong buy,” one has given it a “buy,” three have recommended a “hold,” and one has rated it a “sell.”
iQiyi’s PS (price-to-sales) ratios for fiscal 2018, 2019, and 2020 are 5.8x, 4.3x, and 3.5x, respectively. It’s not possible to value Tencent Video and Youku individually. So we’ll compare iQiyi’s PS ratios with Tencent Holdings (TCEHY) and Alibaba Group Holdings (BABA). Tencent Holdings’ PS ratios for those years are 9.2x, 6.7x, and 5.2x, respectively. Alibaba Group Holdings’ PS ratios for those years are 7.8x, 5.6x, and 4.3x for fiscal 2019, 2020, and 2021, respectively.