When Archegos, a family-run fund, had to liquidate, iQiyi (NASDAQ:IQ) plunged. Large block trades also hurt FarFetch (NYSE:FTCH) and GSX Techedu (NYSE:GSX).
IQ stock’s steep drop is notable. The company, thought of like a Netflix of China, is getting close to lows not seen since 2019. Short interest is now in the 20% range. The bears smell blood and will continue betting against the China-based firm.
Without momentum to keep the share price higher, IQ stock may find new lows in the coming months. Investors who want exposure to China-based firms should look elsewhere. JD.com (NASDAQ:JD), Alibaba (NYSE:BABA), and Baidu (NASDAQ:BIDU) are bigger companies with better liquidity.
Investors are better off speculating on firms whose uncertainties are quantifiable. For example, the government fined Alibaba for its monopolistic practices last Saturday. JD is a dominant retailer in China with advances in logistics. It faces no real competition.
iQiyi supplies video content and depends on advertisers for its revenue. Users may start to leave the platform, hurting its appeal for advertisers. Plus, iQiyi did not post any growth last quarter. In Q4, it lost 32 cents a share on a GAAP basis. Revenue of $1.1 billion is unchanged from last year.
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