iQIYI trending lower ahead of earnings next week
I have written about Chinese firm iQIYI (Nasdaq: IQ) before. I wrote about the online video platform back at the beginning of July when the stock was trading up near the $22 level and I was concerned about a fall in the stock price at that time. Here it is a few months later and I am getting a bearish signal on the stock once again.
While the signal in July and the current signal are based on technical factors, they are backed by the poor fundamentals of the company. iQIYI went public on March 28, 2018 and it has yet to turn a profit—it has lost money in every single quarter. Sales have been increasing, but earnings have yet to reach positive territory and they are expected to be worse for the third quarter of 2019 than they were in the third quarter of 2018. The company reported a loss of $0.63 last year and analysts expect a loss of $0.72 per share when the company reports on November 6.
Sales have increased by 52% per year over the last three years, but they only increased by 11% in the second quarter. Despite the sales growth, earnings declined by 4% in the second quarter. This is a major concern in my opinion. When a young company continues to grow sales, but can't grow earnings, I immediately become worried about the management efficiency. When you combine the sales growth with the profit margin and the return on equity, you get the SMR rating and iQIYI's SMR rating is awful.
The Tickeron SMR rating for this company is 100, indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The score of 100 is the worst possible score a stock can get.
The Tickeron Profit vs. Risk Rating for this company is 100, indicating that the returns do not compensate for the risks. IQ’s unstable profits reported over time resulted in significant drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating for the industry is 85, placing this stock worse than average. This rating is also the worst possible rating a stock can get.
The Tickeron Price Growth Rating for IQ is 83, indicating slightly worse than average price growth. The stock has grown at a lower rate over the last 12 months as compared to S&P 500 index constituents. A rating of 1 points to highest price growth (largest percent return) while a rating of 100 points to lowest price growth (smallest percent return).
Given this fundamental backdrop, it's hard to look at the stock with a bullish view and the chart doesn't really help matters. We see on the daily chart how the stock has been trending lower since February and now a downward sloped trend channel has formed. The stock didn't quite reach the upper rail of the channel, but with the stochastic readings being in overbought territory and making a bearish crossover, I don't think the stock will reach the upper rail this time around.
The Tickeron Trend Prediction Engine generated a bearish signal on iQIYI on October 28. The signal showed a confidence level of 69% and past predictions have been successful 72% of the time. The signal calls for a decline of at least 4% within the next month.
If there is a saving grace for iQIYI, it's the fact that the stock is not overly loved at this time. There are 22 analysts covering the stock at this time and only eight have the stock rated as a "buy". There are 12 "hold" ratings and two "sell" ratings. The overall buy percentage of 36.4% is well below average.
The short interest ratio is currently at 8.45 and that is much higher than average stock. Both the short interest ratio and the analysts' ratings are indicating there is extreme pessimism toward the stock at this time. Expectations seem to be pretty low for the stock, but given the chart and the fundamentals, the sentiment appears to be warranted.
IQ's RSI Indicator ascends from oversold territory
The RSI Oscillator for IQ moved out of oversold territory on November 25, 2024. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 37 similar instances when the indicator left oversold territory. In of the 37 cases the stock moved higher. This puts the odds of a move higher at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 10 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where IQ advanced for three days, in of 264 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on December 16, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on IQ as a result. In of 92 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for IQ turned negative on December 18, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 46 similar instances when the indicator turned negative. In of the 46 cases the stock turned lower in the days that followed. This puts the odds of success at .
IQ moved below its 50-day moving average on December 10, 2024 date and that indicates a change from an upward trend to a downward trend.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where IQ declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
IQ broke above its upper Bollinger Band on December 09, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Aroon Indicator for IQ entered a downward trend on December 05, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (2.432) is normal, around the industry mean (5.661). P/E Ratio (15.630) is within average values for comparable stocks, (92.419). Projected Growth (PEG Ratio) (0.132) is also within normal values, averaging (2.987). Dividend Yield (0.000) settles around the average of (0.040) among similar stocks. P/S Ratio (0.937) is also within normal values, averaging (29.809).
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating slightly worse than average price growth. IQ’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. IQ’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 86, placing this stock worse than average.
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a provider of internet video streaming services
Industry MoviesEntertainment