UBS Upgrades Kingsoft Cloud (KC) to Buy

UBS analyst Wendy Zhan upgraded Kingsoft Cloud (NASDAQ: KC) from Neutral to Buy with a price target of $12.50 (from $4.20).

The analyst comments: "We believe the solid Q3 beat has boosted investors' expectations for KC's continued revenue and margin recovery, backed by AI and Kingsoft's ecosystem support. With surging cloud usage, especially AI-related demand on WPS Office, Xiaomi IoT, smartphone, and EV, we estimate Kingsoft Corp and Xiaomi's revenue contribution to KC to exceed 40% by 2027 from c20% in 2024, driving a 13% revenue CAGR during 2025-27E; a meaningful turnaround from -5% during 2021-24E. Investors were concerned about KC's cash flow conditions to support a sustained capex investment, but Xiaomi's proposed financial support could back the company's Rmb2-3bn annual cost on AI servers and related services during 2025-27. We raise our 2024-26 revenue forecast and upgrade KC from Neutral to Buy. Despite an over 100% price rally YTD, shares are still trading at a valuation discount versus China independent cloud peers, which we think underestimate potential opportunities in Kingsoft and AI business."

For an analyst ratings summary and ratings history on Kingsoft Cloud click here. For more ratings news on Kingsoft Cloud click here.

Shares of Kingsoft Cloud closed at $8.92 yesterday.

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