Avoid iQIYI, Consider Alibaba, JD Instead - and Baidu

At the end of last month, investors dumped the riskiest China-based stocks. iQIYI’s (NASDAQ:IQ) stock collapse is unlikely to recover. The stock peaked at $28.97. Chances are high that it will find new lows in the near term.

IQ stock fell because of a block-trade on March 26 offered by none other than Goldman Sachs (NYSE:GS). The firm sold shares at $15.50. This triggered a panic price drop on the day.

IQ’s Q4 results are hardly impressive. It posted a 1% decrease in total revenue, to $1.1 billion. But it lost $200.4 million in the period. This is still a sharp drop from last year. The operating loss margin of 34% suggests that iQIYI will continue to bleed money this year.

Investors may consider bigger Chinese firms like Alibaba (NYSE:BABA), JD.com (NASDAQ:JD), or Baidu (NASDAQ:BIDU). Not only do they have large market capitalizations but their business is durable. For example, Alibaba’s e-commerce platform faces no competition. Its mobile channels grow every quarter. JD.com spun off its Cloud and AI business on March 31 at a $2.4-billion valuation. And Baidu is considered the Google of China.

iQIYI is a high-risk stock that investors should avoid.