The 'Netflix of China' is still in the 'early innings' compared to Netflix
- iQiyi is the leader in China's three-player video-streaming market, Jefferies said, citing data from Questmobile.
- In 2017, a total of 42% US households are Netflix paying subscriber, while iQiyi's paying subscribers represented only 10% of Chinese households, according to Jefferies.
- iQiyi's proven capability in original-content production, such as "Story of Yanxi Palace," offers "low-hanging fruit in conversion of paying subscribers," analyst Karen Chan said.
- Watch iQiyi trade in real time here.
iQiyi, widely seen as the "Netflix of China," is still in the its early stages, and its proven capability in original-content production could offer "low-hanging fruit" in the near future, Jefferies says.
"Although iQiyi's paying subscriber base of 67 million already surpasses that of Netflix domestically, conversion is still at early innings," Karen Chan, an analyst at Jefferies, said in a note sent out to clients on Sunday.
According to Chan, a total of 42% US households are Netflix paying subscriber in 2017, while iQiyi's paying subscribers represented only 10% of Chinese households last year.
Meanwhile, in China's three-player video-streaming market, iQiyi leads the pack in mobile and PC time spent - with 37% share in August. Tencent Video and Yoku were in second and third at 26% and 17% respectively, Chan said, citing data from Questmobile.
The household penetration rate and iQiyi's position as the market leader both suggest that the company has huge potential to turn China's household video users into their own subscribers, Chan noted. And the video-streaming giant's proven capability in original-content production offers "low-hanging fruit in conversion of paying subscribers," she added.
iQiyi's recent original television drama series "Story of Yanxi Palace" has gone viral in China. The show was the most-watched online drama in China this summer, and received more than 700 million views - a record - on its peak day, suggesting that more than half of the nation's population tuned into the show on a single day, according to iQiyi.
"Original content guarantees exclusivity, converts and retains paying subscribers, while expanding innovative advertising and intellectual property-related monetization potential," Chan said.
"We estimate Fiscal Year 2017-2020 revenue compound annual growth rate of 39% driven by 48% in subscription and 30% in advertising," she added, assigning a "buy" rating and $33 price target - 29% above shares were currently trading.
iQiyi shares are down 41% from their June record high, but still up 66% from where they went public in March.
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