The Study Of Online Video Platform Company's Valuation

Online video industry to some extent represents the future of online entertainment.During 2018,China has 53 internet companies went IPO oversea,which includes 4 companies that focus on the online video.By the end of 2018,32 of these foreign issued stocks fell below issue price,at an astonishing rate of 61%.In comparison,IIQIYI has a high stock premium at 78.4%.Although online video industry has a relatively low net profit,they are acknowledged by the capital market.Unicorns in internet industry now face three main challenges in valuation: unprofitable book value,short history in the market,lack of comparable companies of its kind.The article takes this as an entry point,selects the Internet video segmentation industry,focuses on the reasonable valuation method of IQIYI value,and calculates the valuation interval,in order to provide reference for the rational pricing and valuation of the Internet video industry in the capital market.This article first introduces absolute valuation method,relative valuation method and ARPU model.Then the article will examine the strength and limitations of each method by doing a meta-analysis of existing literature.In the main paragraph,IQIYI is selected as a case study because of its representativeness in the market and it has the largest user base in China.Then we discuss and compare three methods,DCF,P/S,ARPU for valuation modeling.The specific steps are as below:We first analyzed the industry segment of IQIYI and compared it with its foreign counterpart,Netflix,and perform a fundamental analysis for Netflix.By subtracting parameters in operation and finance from a more mature online video company,we can then use it as reference to forecast cash flow when profit of IIQIYI goes up.After that,when we do fundamental analysis for IQIYI,we focus on splitting up all the parts of revenue and costs,which enables us to predict growth by each business function.In P/S model,based on the financial forecasting done above,we then find comparable companies in similar type and size,calculate average P/S ratio,using P/S ratio get IQIYI's EV.In ARPU model,based on the previously predicted indicators such as the size of the user,the calculation of the ARPU of the IQIYI paid service and the advertising business is separately considered and calculated.Finally,the three methods are compared and analyzed to find out the reasons for the difference in the value measured by the three valuation methods,and further analysis of the true value of IQIYI.