Citi analyst Brian Gong upgraded the rating on Kingsoft Cloud Holdings (KC – Research Report) to a Buy yesterday, setting a price target of $5.00.
Brian Gong has given his Buy rating due to a combination of factors including the positive outlook on Kingsoft Cloud Holdings’ financial and operational performance. The recent earnings report for the fourth quarter of 2023 showed results that aligned with consensus expectations for both revenue and adjusted earnings, signaling stability in the company’s financials. Gong observes that the company has seen a resumption of sequential revenue growth following the optimization of its low-margin business. Moreover, there has been a notable improvement in EBITDA margins, attributable to efficiency enhancements and the continued optimization efforts. These developments suggest a strong foundation for future growth and margin expansion, particularly with the increasing contribution from AI-related revenues.
Looking forward, Gong’s optimism is further supported by projections of moderate revenue growth post-optimization and anticipated margin improvements driven by high-margin AI-related revenue streams. The upward revision of margin forecasts for 2024 and 2025 reflects confidence in the company’s ability to surpass previous expectations for profitability. Additionally, Gong highlights potential opportunities that could contribute to demand, such as the large-scale rollout of WPS AI products and the launch of Xiaomi’s electric vehicle. Despite Kingsoft Cloud Holdings’ current loss-making status, which warrants a High Risk designation, Gong sees a favorable risk-reward balance, underpinning the Buy rating and suggesting significant potential for share price appreciation.
In another report released on March 11, Jefferies also maintained a Buy rating on the stock with a $3.40 price target.
KC’s price has also changed moderately for the past six months – from $4.760 to $3.740, which is a -21.43% drop .
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Kingsoft Cloud Holdings (KC) Company Description:
Kingsoft Cloud Holdings Ltd is an independent cloud service provider in China. The company has built a cloud platform consisting of cloud infrastructure, cloud products and industry-specific solutions across public cloud, enterprise cloud and AIoT cloud services. Its products and service include Cloud Server, Cloud hard disk, Virtual private network, Relational Database, and others. Geographically, the firm operates in China.
