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On Wednesday, Jefferies analyst Thomas Chong revised the price target for Kingsoft Cloud (NASDAQ:KC) stock, reducing it to $16 from the previous $18, while still recommending the stock as a Buy. The adjustment follows the company’s first-quarter results, which showed revenues and adjusted EBITDA falling short of market expectations. This underperformance was attributed to seasonal factors and timing issues related to product deliveries. According to InvestingPro data, KC currently trades at $11.74, with analyst targets ranging from $4.13 to $26.13, reflecting the stock’s characteristic high volatility.
In his analysis, Chong highlighted the strong demand for Kingsoft Cloud’s artificial intelligence services and the company’s exploration of various business models. He noted that the firm’s new approach to leasing could potentially reduce gross profit margins (GPM) but would also decrease reliance on the company’s cash reserves. Following the first-quarter outcomes, Chong has updated the full-year revenue and margin forecasts to align with the recent trends observed. The company has shown impressive momentum, with InvestingPro data revealing a remarkable 341.78% return over the past year, despite current profitability challenges. Get access to 10+ additional ProTips and comprehensive analysis with an InvestingPro subscription.
Despite the reduction in the price target, the Jefferies analyst emphasized the durability and high quality of Kingsoft Cloud’s growth model. He pointed out that, in his view, the company’s overall strategy remains sound. Chong’s commentary suggests that, while there have been adjustments to the financial expectations, his confidence in the company’s long-term prospects continues to support a Buy rating. This aligns with the broader analyst consensus, as tracked by InvestingPro, which maintains a positive outlook on the stock. The company’s revenue grew by 10.47% in the last twelve months, though InvestingPro’s Financial Health Score indicates a "FAIR" overall rating.
Kingsoft Cloud’s management has also underscored the robust demand for AI solutions, indicating an ongoing effort to adapt and succeed in various business segments. This strategic flexibility is seen as a positive sign, reflecting the company’s ability to navigate market changes and maintain a trajectory of growth.
The current price target of $16 represents Jefferies’ valuation of Kingsoft Cloud’s stock based on the latest financial data and market conditions. Investors will be watching closely to see how the company’s strategic initiatives and market demand for AI services unfold in the coming quarters.
In other recent news, Kingsoft Cloud Holdings Limited reported first-quarter earnings that exceeded expectations, though its revenue fell short of analyst estimates. The company posted adjusted earnings per share of -RMB0.08 ($0.01), surpassing the analyst consensus of -RMB0.62. However, revenue came in at RMB1.97 billion ($271.5 million), missing the RMB2.03 billion estimate. Revenue grew 10.9% year-over-year but experienced an 11.7% decline from the previous quarter. Public cloud services revenue rose 14% year-over-year to RMB1.35 billion, largely due to increased demand for artificial intelligence applications. Enterprise cloud revenue increased 4.8% year-over-year to RMB616.5 million but fell 25% quarter-over-quarter, attributed to seasonal factors. CEO Tao Zou highlighted a 228% year-over-year surge in AI-related gross billings, totaling RMB525 million. The company’s adjusted gross profit grew 9.6% year-over-year to RMB327.7 million, although the adjusted gross margin slightly dipped to 16.6%. CFO Henry He noted an adjusted EBITDA profit of RMB318.5 million, representing a 16.2% margin, but the revenue miss seemed to weigh heavily on investor sentiment.
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