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On Thursday, UBS analysts assumed coverage of Kingsoft Cloud stock (NASDAQ: KC) with a Buy rating, raising the price target to $14.00 from the previous $12.50. The analysts highlighted the company’s position as a pure-play cloud vendor with significant AI exposure, which is projected to increase from 17% of total revenue in 2024 to over 40% by 2027. According to InvestingPro data, the company has demonstrated strong momentum with a remarkable 310% return over the past year, despite currently showing weak overall financial health.
The analysts forecast a turnaround in Kingsoft Cloud’s public cloud growth, predicting a 20% revenue compound annual growth rate (CAGR) from 2025 to 2027. This growth is expected to be driven by the expanding demand for AI-driven cloud services, increased demand from Xiaomi (OTC:XIACF)’s ecosystem, and continued expansion of third-party clients. Recent InvestingPro data shows revenue growth of 14.67% in the last twelve months, with total revenue reaching $1.1 billion.
Additionally, the analysts anticipate that Kingsoft Cloud’s non-GAAP operating margin will narrow its losses before achieving profitability in 2027. This is attributed to a higher mix of AI revenue and cost efficiency driven by scale. Current InvestingPro metrics show a gross profit margin of 17.12%, though the company remains unprofitable with negative returns on assets and equity.
Kingsoft Cloud is currently trading at 2.4 times its estimated 2025 price to sales (P/S) ratio, which is below its recent average and peak levels of 2.6 and 4.2 times, respectively. The company’s valuation has returned to pre-DeepSeek levels, according to the analysts.
The positive outlook on Kingsoft Cloud’s stock reflects its potential to benefit from growing demand in the AI and cloud sectors, as highlighted by UBS.
In other recent news, Kingsoft Cloud Holdings Limited reported its first-quarter earnings, which surpassed expectations with an adjusted earnings per share of -RMB0.08 ($0.01), beating the analyst consensus of -RMB0.62. However, the company’s revenue fell short of estimates, coming in at RMB1.97 billion ($271.5 million) against the expected RMB2.03 billion. Revenue grew 10.9% year-over-year but declined 11.7% sequentially. Public cloud services revenue increased by 14% year-over-year, driven by growing demand for artificial intelligence. In contrast, enterprise cloud revenue rose 4.8% year-over-year but dropped 25% quarter-over-quarter due to seasonal factors. Jefferies analyst Thomas Chong responded by lowering the price target for Kingsoft Cloud to $16 from $18 while maintaining a Buy rating, citing the company’s strategic exploration of business models and the potential impact on gross profit margins. Additionally, Kingsoft Cloud announced changes to its board of directors, with a non-executive director resigning and a new one being appointed, though further details were not disclosed. The company’s management emphasized the robust demand for AI solutions and expressed confidence in their strategic adaptability amidst market changes.
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