Why iQiyi, Inc. Stock Popped on Thursday

MarketsMotley Fool

What happened

iQiyi Inc. (NASDAQ: IQ) stock jumped 10.8% on Thursday as the broader market shrugged off concerns of a brewing trade war with China. There was no company-specific news today that might otherwise merit its increase.

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So what

The so-called "Netflix of China" has a history of significant moves -- both up and down -- without substantial news to back them. iQiyi is also still subject to plenty of post-IPO volatility since spinning off from former parent Baidu earlier this year. And after enjoying a meteoric rise shortly thereafter -- nearly tripling between early May and late June -- as of yesterday's close, iQiyi stock had tempered its gains to trade more than 30% below its recent highs.

It is worth noting that major stock market indexes -- and Chinese tech stocks, in particular -- plunged yesterday when the Trump administration threatened to impose $200 billion in additional tariffs on imported Chinese goods, stoking fears of an impending trade war between the U.S. and China. The market all but recouped those losses today, however, as investors opted to look instead toward the start of corporate earnings season.

Now what

Of course, the vast majority of iQiyi's more than 61 million paying subscribers are in China. And with the exception of its new offline movie theater initiative, also in that country, its products are primarily digital. So it's unlikely Trump's tariffs would have any direct impact on the company's growth story in the near term -- unless perhaps they hit the pocketbooks of China's burgeoning middle class, members of which are proving increasingly willing to pay up for the premium entertainment content that iQiyi serves.

In any case, bullish investors certainly won't complain about today's positive move. But rest assured it had nothing to do with changes in iQiyi's underlying business.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends iQiyi. The Motley Fool has a disclosure policy.