iQIYI (IQ) is in the spotlight after its 18 August earnings release, which showed lower second quarter and first half revenue, alongside a wider net loss compared with the prior year period.

The weak second quarter, together with the completed share repurchase of 21.8 million shares earlier in the year, has been met with selling pressure, with iQIYI’s share price falling 24.1% over the past week and the 1 year total shareholder return down 58.1%. This points to fading momentum despite the most followed valuation narrative suggesting the stock may trade below its estimated fair value.

If earnings volatility has you reassessing your watchlist, this can be a good moment to look at other areas of the market through the 76 profitable AI stocks that aren't just burning cash

For iQIYI, the bull case leans on a discounted share price and a completed buyback, while the bear case focuses on falling revenue and a return to losses. Which side does the current valuation really support?

Most Popular Narrative: 34.3% Undervalued

Based on the most popular narrative, iQIYI’s fair value of $1.54 sits well above the recent $1.01 close. This puts a spotlight on the assumptions behind that gap.

Initiatives in IP-based consumer products and offline "experience" businesses (theme parks and immersive centers) are opening new, scalable revenue streams beyond core streaming, enhancing overall monetization and potentially improving net margins as these asset-light strategies mature.

It is worth examining what earnings power this fair value leans on. The narrative ties iQIYI’s streaming base to offline experiences and higher margins, built on detailed long term forecasts that are not yet reflected in recent results.

Result: Fair Value of $1.54 (UNDERVALUED)

However, there are still clear risks to the iQIYI story, including ongoing revenue pressure from weaker membership and advertising trends, as well as rising content costs that strain margins.

Next Steps

With sentiment on iQIYI looking split, this may be a useful moment to act promptly and review the numbers yourself. Start by reviewing the 3 key rewards

Looking for more iQIYI investment ideas?

If iQIYI has you rethinking your next move, do not sit on the sidelines. Use the Simply Wall Street Screener to spot opportunities that fit your style.

• Target resilient income by reviewing companies that show the potential to be long term payers through the 12 dividend fortresses
• Hunt for potential bargains by scanning for stocks that appear attractively priced using the 49 high quality undervalued stocks
• Prioritise capital protection first by focusing on companies with sturdier profiles through the 74 resilient stocks with low risk scores

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.