What happened
Investors in the Chinese streaming video specialist iQiyi (NASDAQ: IQ) enjoyed a brief rally this past week. Shares rose by more than 10% at one point before falling back to a 2% increase through Thursday trading. The wider market fell 1.6% in that period, according to data provided by S&P Global Market Intelligence.
The rally was sparked by iQiyi's Q4 earnings update, which featured improving trends on both the top and bottom lines. Let's take a closer look.
So what
Revenue landed at $1.1 billion for the three-month selling period that ended in late December, management said in a Wednesday earnings report. That result marked an improvement over the prior quarter's 2% decline and edged past most investors' expectations.
iQiyi also made positive strides on earnings. Operating profit margin rose to 10% of sales from 4% of sales in the prior quarter, with help from cost cuts and faster membership acquisitions. "We wrapped up a remarkable year of turnaround with outstanding performance in the fourth quarter," CEO Yu Gong said in a press release.
Now what
The Q4 period marked the fifth consecutive quarter of rising operating margin, which is a great sign about the strength of iQiyi's earnings. The growth uptick also demonstrated that the company can improve engagement and acquisition trends with help from popular original content releases.
But the streaming video specialist still has work to do in accelerating sales trends and cutting costs. It might be some time before shareholders see substantial net income per share, too, in part because the company aggressively issued new stock in 2022 so that it could pay down its debt. As a result, look for this stock to remain volatile while iQiyi works to stabilize, and then grow, its annual earnings.
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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends iQIYI. The Motley Fool has a disclosure policy.
