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On Wednesday, Jefferies maintained a Buy rating on Kingsoft Cloud (NASDAQ:KC) shares and increased the price target to $5.80 from $3.80. This adjustment followed Kingsoft Cloud's third-quarter earnings report, which displayed revenues in line with market expectations and an adjusted EBITDA that surpassed forecasts.
Kingsoft Cloud's third-quarter performance highlighted the significant contribution of its AI cloud services, which accounted for 31% of the company's public cloud revenue. This segment is not only growing rapidly but also offers higher margins compared to other areas of the business.
The company's management anticipates an acceleration in year-over-year revenue growth into the fourth quarter. This expectation is supported by the prediction of double-digit sequential revenue growth, bolstered by the increasing contributions from AI services and expected expansion in EBITDA margin.
The analyst expressed a positive outlook on Kingsoft Cloud's future, expecting the company to capitalize on the burgeoning AI narrative. The firm anticipates that Kingsoft Cloud's improving fundamentals will support its growth trajectory in the technology sector.
In other recent news, Kingsoft Corporation Limited reported third-quarter results exceeding analyst expectations, with revenue and earnings surpassing estimates. The company's revenue for the quarter was RMB2.91 billion ($405 million), a 42% YoY increase, and an 18% sequential rise, outperforming the consensus estimate of RMB1.88 billion. Kingsoft also reported an adjusted loss per share of RMB0.22, notably less than the projected RMB1.07 per share loss.
The primary growth driver was online games and other services, with revenue surging 78% YoY to RMB1.71 billion. The company attributes this success to the robust performance of its JX3 Online game and the successful launch of JX3 Ultimate. Office software and services revenue also saw a 10% YoY increase to RMB1.21 billion.
These recent developments also include Kingsoft's anticipation of "accelerated growth" in total revenues for the fourth quarter, primarily driven by its public and enterprise cloud businesses. The company also expects further improvement in profitability.
InvestingPro Insights
Kingsoft Cloud's recent performance and Jefferies' optimistic outlook are further supported by real-time data from InvestingPro. The company's stock has shown remarkable strength recently, with a 65.11% price return over the past month and an impressive 93.67% return over the last three months. This aligns with the analyst's positive view and increased price target.
InvestingPro Tips highlight that Kingsoft Cloud is a prominent player in the IT Services industry, which is particularly relevant given the company's focus on AI cloud services. However, investors should note that the company is currently not profitable over the last twelve months, with a P/E ratio of -5.22. This underscores the importance of the anticipated acceleration in revenue growth and expansion in EBITDA margin mentioned in the article.
For a more comprehensive analysis, InvestingPro offers 13 additional tips for Kingsoft Cloud, providing investors with a deeper understanding of the company's financial health and market position.
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