Yahoo Finance When Will iQIYI, Inc. (NASDAQ:IQ) Become Profitable?
We feel now is a pretty good time to analyse iQIYI, Inc.'s (NASDAQ:IQ) business as it appears the company may be on the cusp of a considerable accomplishment. iQIYI, Inc., together with its subsidiaries, provides online entertainment services under the iQIYI brand in the People’s Republic of China. With the latest financial year loss of CN¥6.2b and a trailing-twelve-month loss of CN¥4.8b, the US$3.5b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is iQIYI's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
See our latest analysis for iQIYI
iQIYI is bordering on breakeven, according to the 19 American Entertainment analysts. They expect the company to post a final loss in 2023, before turning a profit of CN¥991m in 2024. Therefore, the company is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 65% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving iQIYI's growth isn’t the focus of this broad overview, but, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one issue worth mentioning. iQIYI currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.
Next Steps:
There are too many aspects of iQIYI to cover in one brief article, but the key fundamentals for the company can all be found in one place – iQIYI's company page on Simply Wall St. We've also put together a list of essential factors you should further research:
Valuation: What is iQIYI worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether iQIYI is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on iQIYI’s board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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