This is a lengthy article, worthwhile reading for anyone interested/invested in Chinese ADRs. After doing a copy/paste of the first part of the article, I am jumping to the end where IQ is discussed:
Trade Wars And Tariff Woes: What Do They Mean For Investors?
SA Marketplace
Sep. 14, 2018 7:30 AM ET
Summary
U.S.-China trade talks are tenuous at this point. Where we'll end up on tariffs is uncertain.
To be sure, that presents risk for investors, however, China markets expert B&B Market sees ample opportunity amid the chaos.
The author of Corporate China, a relatively new service on Marketplace, explains why he's bullish on China, why he believes the tariffs risks are short lived, and shares his current best idea: iQiyi (IQ).
The U.S.-China trade talks are a fluid situation. At the time of writing, the Trump Administration is considering tariffs on $200 billion worth of Chinese goods in retaliation for what it deems "unfair economic practices" on the part of the Chinese government. However, the U.S. has just invited China to the table to discuss ways to ease trade tensions between the two countries. How that plays out remains to be seen. Larry Kudlow, head of the White House Economic Council, says he "guarantees nothing" as a result of the talks. Clearly, this has introduced a layer of uncertainty for global and U.S. markets, so much so that JPMorgan said, "The threat of an escalating trade war with major partners is the biggest risk facing U.S. stocks and could become a major drag on earnings in 2019."
If you ask B&B Market, an avid watcher of the Chinese market and economy, the trade wars create opportunities for investors. He also doesn't see tariff concerns as a long-term problem. However, the author of Corporate China on Marketplace, a service focused on Chinese companies with U.S. ADRs in the context of the Chinese economy, also believes that until the trade situation gets sorted, domestic stocks will likely experience some of the blowback from the tariffs threat, which certainly introduces additional risks for investors. That's why it's important, in his opinion, for investors to weigh their options carefully in the context of the current situation, until we see how the "trade wars" shake out. B&B Market joined the Roundtable to share his views on what tariff talks mean for companies heavily dependent on China and their investors, discuss where he's seeing opportunities, and offer up an idea he's been pounding the table on for quite some time: iQiyi ( IQ).
[snip to IQ section]
SA: What’s your current favorite Chinese investing idea, and what’s the story?
B&B: My favorite idea, and I've been a fan since the beginning, is iQiyi ( IQ). I believe it holds a lot of potential for investors, and it is just a solid company with a lot opportunity. We have seen what Netflix (NASDAQ: NFLX) can do within the U.S. and even internationally, but there is no access within China because of their firewall. The streaming market is relatively young in China, and there is still room for a lot of growth.
There are other competitors within the market, the big one being Tencent Video, but iQiyi has a large market share (~25%) and is a nicely run company. Management has been garnering partnerships with a multitude of other industries including airlines, logistics, and entertainment. Revenues and membership rates have increased dramatically over the last and in the quarters that have been reported so far. Sales doubled from 2015 to 2016, and they increased 52% from 2016 to 2017. The company is increasing its EBITDA each year as well, up more than 400% over the past 2 years. Time and time again there are PR announcements that show some positive move by the company such as the partnerships, or more streaming deals, or a new payment system on the platform. The fact that iQiyi is backed by Baidu can't be overlooked. Since Baidu is the largest search engine in China, search queries from iQiyi are ranked higher than other competitors. I've written about IQ before, and I will again; I really like this stock.
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