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On Wednesday, Citi analyst Brian Gong confirmed a Buy rating on Kingsoft Cloud (NASDAQ:KC) with a price target of $21.50, representing significant upside potential from the current price of $12.42. According to InvestingPro data, analyst targets for KC range from $4.09 to $25.88, with the stock currently showing strong momentum after a remarkable 351.64% gain over the past six months. Gong’s statement highlighted the significant rally in Kingsoft Cloud’s H-share, attributing the surge to the release of Xiaomi (OTC:XIACF)’s first Large Language Model (LLM), MiMo. According to Gong, MiMo has outperformed competitors such as OpenAI’s o1-mini and Alibaba (NYSE:BABA)’s Qwen-32B-Preview in specific tasks like mathematical reasoning and code generation. With a market capitalization of $3.13 billion and a projected revenue growth of 22% for FY2025, KC has positioned itself as a prominent player in the IT Services industry. Get deeper insights into KC’s growth potential with InvestingPro’s comprehensive research report, which includes detailed analysis of the company’s AI initiatives and financial health.
Gong pointed out that a substantial portion of Kingsoft Cloud’s projected AI computing revenue in 2025 is expected to be generated from its relationship with Xiaomi, as outlined in their connected party transaction framework. This partnership is anticipated to be a key factor in driving margin improvements in 2025 due to the higher margin profile of AI computing revenues. InvestingPro analysis indicates the company currently maintains a FAIR financial health score, with particularly strong momentum metrics despite showing some challenges in profitability.
The release of Xiaomi’s MiMo is seen as a testament to the parent company’s capabilities and commitment to advancing AIGC technologies. Gong suggests that this could lead to long-term benefits for Kingsoft Cloud’s AI computing revenues and margins. The analyst emphasized that further progress in the parent company’s AI-related products is viewed as a crucial catalyst for Kingsoft Cloud.
Citi has expressed a 30-day positive outlook following the launch of Xiaomi’s MiMo, predicting that the new LLM could validate the parent company’s proficiency and dedication to AIGC technologies. These technologies could be integrated into various business scenarios for Xiaomi, ultimately favoring Kingsoft Cloud’s AI computing revenues. Gong anticipates robust top-line growth for Kingsoft Cloud in 2025, primarily driven by the increasing demand for AI computing from Xiaomi, which is also expected to contribute to margin expansion.
In other recent news, Kingsoft Cloud Holdings Limited reported impressive fourth-quarter earnings, surpassing analyst expectations with a 30% year-over-year revenue increase. The company achieved a narrower adjusted loss per share of RMB0.05 ($0.01), outperforming the anticipated RMB0.73 loss. Revenue reached RMB2.23 billion ($305.8 million), exceeding the consensus forecast of RMB2.09 billion, and the company recorded its first non-GAAP operating profit since its inception in 2012. In a strategic move to further its growth, Kingsoft Cloud announced plans for a public equity offering and a concurrent private placement with its parent company, Kingsoft Corporation. The company has filed the necessary documents with the U.S. Securities and Exchange Commission for this offering, although details such as the number of shares and price range have not been disclosed. Additionally, Kingsoft Cloud submitted its latest report to the SEC, which includes its 2024 Hong Kong Annual Report and Environmental, Social, and Governance Report. These documents aim to provide insights into the company’s financial health and sustainability practices. Investors are closely monitoring these developments, as they could significantly impact Kingsoft Cloud’s market position and financial standing in the expanding cloud services sector.
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