There is a lot of upside for one streaming stock out of China, according to Bank of America. Analyst Lei Zhang upgraded US-traded iQIYI shares to buy from neutral, saying the Baidu-backed Chinese online video platform has an edge due to its strong internal content library. iQIYI offers Chinese, Korean and Thai dramas, as well as various shows and movies. “IQ’s strategy to focus on in-house content with higher quality control and lower production costs continues to benefit subscription growth and ROI. It delivers a number of hit content across multiple genres in 2022 and YTD 2023, while increasing membership mix long-term and better user engagement,” analysts wrote in a Thursday note to clients. IQ 1D mountain 1-day chart iQIYI shares will rise more than 30% in 2023, after a 16% gain last year. Regardless, analysts’ $9 price target, up from $4.70, means the stock could rise more than 30% from Wednesday’s close of $6.85. Shares advanced 7% during Thursday trading. The analyst predicted a further rise to 2023 and 2024 earnings estimates after the company’s profit growth in the second half of 2022, according to the note. With its in-house content strategy, iQIYI differentiates itself from peers such as Tencent Video and Youku Video, which focus on property-based strategies and large intellectual scale, according to the note. What’s more, the company is expected to increase production levels at home. Domestic production as a percentage of iQIYI’s content grew to more than 50% in 2022, and the mix is expected to reach 60% to 70% in the long term, the analyst said. “In-house production helps reduce content costs, with total content costs falling from 84% of revenue in 2018 to 70% in 2019-21 and further down to 57% in 2022. We expect content costs to drop to ~50% by 2024 ,” the analyst wrote. “Meanwhile, the subscription business and content quality benefit from quality in-house production. IQ has been able to produce hit dramas in various genres and has increased the number of in-house content over the past several years,” the note continued. Specifically, the analyst mentioned the success of the drama series “Punch Out”. — CNBC’s Michael Bloom contributed to this report.