IQ Stock Jumps 38%! What Now?

Overview

IQ is a streaming service company headquartered in Beijing, China. The Chinese streaming service jumped nearly 40% yesterday on some good news. Tencent Holdings, a multinational conglomerate, came out saying that they want to be the biggest shareholders in IQ to reduce competition. Baidu already owns 56% of IQ's shares, controlling over 90% of voting shares. Now there is potential competition for who can be the majority stakeholders in this company.

Financials

With a market cap of over $18 billion, the company looks extremely overvalued for what it's priced at. They have been increasing their losses for the past 5 years, losing hundreds of millions and now $1.5 billion.

https://www.marketwatch.com/investing/stock/iq/financials

But those losses don't seem to reflect how well the company has performed in sales. IQ raked in over $4.2 billion in revenue in 2019 with an EBITA (Earnings Before Interest Taxes and Amortization) $1.13 billion, meaning that they generate that much before taxes and spending. This growth company is only about 10 years old, and people could argue that they're no longer in their primary growth phase. But how can a company generate $1.13 billion and be at a loss of $1.49 billion by the end of a year?

https://www.marketwatch.com/investing/stock/iq/financials

One answer could be that they are spending lots of money on licenses to stream videos, producing online video games, virtual reality headsets and much more. Like Netflix, they want to create their own original shows as well as ebook stores. They spent $300 million alone just acquiring a mobile video game developer, Skymoons. IQ is looking to expand farther than Netflix if they are to compete with them, so they must spend lots of money in the meantime.

Investor Sentiment

In 2018, IQ was at 87.4 million subscribers, and now they have 118.9 million. Nearly 100% of members are paid subscribers. At $3.00 a month, it seems like a pretty good deal for all this content. IQ has the lowest P:E ratio in five years, which can mean that less people are not willing to pay higher than its actual value, or it could mean that the company is not as overvalued as it once was. Lots of investors see this company with great potential, and the news from Tencent caused a huge surge in yesterday's session. Overall sentiment is still bullish, but short term traders look at this with more of a bearish mentality.

What Now?

After the news from Tencent, there is not much left to be excited about in the short term. Yes, the company is still losing money, but sales have been enormously increasing over time. After this recent pop-up, I wouldn't look to buy just yet. I still feel confident that this company will do great in the future, so I've been looking to invest. In my opinion, the price has got to be cheaper for me to see it as an attractive buy. Tencent still hasn't invested and is still talking about it. So, this news could blow over and prices could fall. As soon as Tencent decides to go through with it, buying IQ could be a nice trade or maybe an investment for the believers in the next competitor of Netflix.


Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.

Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Looking for a Broker?

Check out our favorite brokers & reviews! Find brokers available in your country, or our top rated brokers to consider.
Find a Broker
More Articles
January 17, 2021
Weekly Forex Forecast for GBPUSD, CADJPY, GBPAUD, XAUUSD (17-22 January 2021)

Weekly Forex Forecast for GBPUSD, CADJPY, GBPAUD, XAUUSD (17-22 January 2021) Hey everyone! Welcome to this week's forex forecast for the week ending January 22nd, 2021. I'm TraderBart with A1 Trading, and this week I'll be looking at GBPUSD, CADJPY, GBPAUD & XAUUSD. GBPUSD Looking at GU on the Daily timeframe, price has been channelling […]

Read More
January 10, 2021
Weekly Forex Forecast for GBPUSD, EURCHF, USDJPY, XAUUSD (10-15 January 2021)

Weekly Forex Forecast for GBPUSD, EURCHF, USDJPY, XAUUSD (10-15 January 2021) Hey everyone! Welcome to this week's forex forecast for the week ending January 15th, 2021. It's so great to be back, I hope everyone's had a fantastic holiday, and I hope everyone's motivated to work 10x harder than last year. I'm wishing everyone nothing […]

Read More
December 21, 2020
Top Trading Ideas for 2021

Throughout the year, we've seen many changes to the way we trade, how we manage risk and how we interpret the markets. The new insights we have gained over the months usually come after years of trading and adapting to ever-changing environments. We've done all that in a matter of months! Up until the New […]

Read More

Related Articles

August 28, 2020
Economic stimulus and the Role of Central Banks

Politics preventing new financial stimulus The economic recovery in the major global economic powers depends on several important factors. One of the most vital part, the spread of the virus and the government's answers to it. With a decrease in daily cases of COVID-19 to 50,000 in the U.S.A. Yet U.S. A remains the most […]

Read More
August 26, 2020
How to Spot a Scammer

Our team has unfortunately received many reports of scammers using our content and pretending to be us.¬†While we will continue to report these accounts to the authorities as we receive reports, we may not always catch them in time. Below our a list of things to look out for before making a purchase to any […]

Read More
August 22, 2020
Legends of Investing - The Story of Warren Buffet

Warren Buffett is one of the most idolised, investors in the world. At the time of writing , his company, Berkshire Hathaway, has a market cap of $495 billion and Buffett himself has a net worth of $79 billion. His approach to value investing, combined with his influence over the companies he invests in , […]

Read More

A1 Trading Company

A1 Trading Company is a financial services and media business founded in Atlanta, USA.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram