[PUBLIC 2019.08.20] IQ Valuation Model
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Revenue
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201820192020202120222023
5-Year CAGR
Base Rate
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IQIYI Revenue$3.72$4.32$4.84$5.32$5.72$6.1210.50%
23% comparable companies grew 10%+; 48% grew 5%+
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Implied Total YoY Rev Growth16.25%12.00%10.00%7.50%7.00%
If subscriptions grew at 10.5% pace => 165MM subscribers by 2023, which is not unreasonable (even assuming no gain in ARPU, which is unlikely)
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Operating Margin
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Operating Margin Target10%
<- NFLX 10-13% op margin. Interestingly, large content creation companies (DIS, CBS, VIA, ) actually have very strong operating margins - closer to 20%. Streaming services are really evolving into original content creation companies, and the streaming aspect will likely becoming a technical commodity. It's not unrealistic to assume that IQ should be valued as a "studio" rather than tech company, with operating margins approaching "studio" margins (10-20%) long term
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