not vested
iQIYI has rebounded 50% from its December low after losing two-thirds of its value during the sell-off. But it still remains well below its June all-time high of $46.23.
While it may take time to regain that high status, I am confident that fresh records will be achieved in the coming years. For buyers of the stock today, that would represent a double.
iQIYI is the leader in video streaming in a country that is home to more than 1.3 billion people and is growing its economy by 6%. Disposable income will grow as the middle class does, leading to more and more subscribers for IQ.
Subscriber growth is a key metric for companies like iQIYI -- just like it is for Netflix (NFLX) and Facebook (FB). The company is on the right track. Its premium subscriber total -- those who actually pay -- grew 89% over the last year to nearly 81 million people.
Also similar to NFLX when it was in its early stages of growth, IQ continues to lose money. But that's perfectly okay. When a company is focused mainly on growth, the next most important figure is the top line. iQIYI has increased revenue 48% over the last year, which is a very impressive number.
Now on to valuation. Based on iQIYI's current market cap of $14.5 billion and projected 2019 sales of $4.85 billion, the stock trades with a price-to-sales ratio of 2.99. Compare that to Netflix, which trades with a 2019 price-to-sales ratio of 7.43.
It is very common for a U.S.-based company to have a higher valuation than its Chinese peers. But with growth projections higher for IQ and the potential market in China wide open, trading at just 40% of NFLX's value makes IQ a huge bargain buying opportunity for long-term investors.
So ... is IQ a good buy at current prices near $20?
If you're an investor with a lot of patience and a strong long-term outlook, then I would answer that question with a big "yes!"
If you're still concerned about risk, you can establish tight stop losses.
Source: Investor Place