IQ

We rate iQIYI, Inc. (IQ) as a Hold with a composite score of 56.7/100 at a current price of $1.77. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in value (92th percentile) and quality (71th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (41/100), High uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

iQIYI, Inc. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 56.7/100 places it at rank #1069 in our full 7,333-stock universe. At $1.9B in market capitalization, iQIYI, Inc. is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -11% combined with momentum at the 47th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 25% (-34.7pp vs sector) narrow to operating margins of 6% (+2.7pp vs sector) and net margins of 2.7%, yielding a gross-to-net conversion rate of 11%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $1.77, iQIYI, Inc. appears undervalued relative to its fundamentals. Our value factor score of 92/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 663.0x (a 2693% premium to the sector median of 23.7x), EV/EBITDA of 0.4x (discounted to peers), P/B of 1.0x, P/S of 0.1x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a High uncertainty rating to iQIYI, Inc.. Key risk factors include significant leverage (102% debt-to-equity), elevated valuation multiple (P/E 663.0x) that leaves limited margin for error, the combination of leverage (102% D/E) and thin margins (2.7% net) amplifies downside risk. The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (102% debt-to-equity); elevated valuation multiple (P/E 663.0x) that leaves limited margin for error; the combination of leverage (102% D/E) and thin margins (2.7% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 58th percentile and quality factor at the 71th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate iQIYI, Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 23.7%, and the balance sheet is managed within acceptable parameters (D/E: 102%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; iQIYI, Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, iQIYI, Inc. receives a Hold rating with a composite score of 56.7/100 (rank #1069 of 7,333). Our quantitative framework assigns a Narrow Moat (41/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 63/100.

Our analysis supports a neutral stance on iQIYI, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.