BofA Securities has adjusted its price target for Kingsoft Cloud Holdings Limited (NASDAQ: KC), reducing it to $3.20 from the previous $3.80, while retaining a Neutral rating on the stock.
The adjustment followed the release of the company's financial results for the second quarter of 2024, which were disclosed on August 20.
Kingsoft Cloud's revenue for the quarter reached Rmb1.89 billion, marking a 3% year-over-year increase and a 7% rise from the previous quarter. These figures surpassed both the consensus and BofA Securities' estimates by 4% and 5%, respectively.
The company's adjusted EBITDA saw a significant 83% quarterly growth, reaching Rmb61 million, with an adjusted EBITDA margin of 3.2%. This margin improvement was attributed to a combination of steady revenue recovery, gross profit margin enhancement, and effective cost control measures.
The firm noted that due to Kingsoft Cloud's robust expansion in its artificial intelligence (AI) business, revenue forecasts for the fiscal years 2024 to 2026 have been increased by 2-3%.
However, the price objective was recalibrated to $3.20, correlating with a change in the 12-month forward P/S ratio valuation from 0.9x to 0.7x. This change reflects a broader de-rating in the sector's valuation.
In other recent news, Kingsoft Cloud Holdings Limited reported positive financial results for the second quarter of 2024. The company's earnings call revealed a gross margin increase of 17% and an adjusted EBITDA margin of 3%.
Kingsoft Cloud's quarterly revenue was RMB1.89 billion, signifying a 6.5% sequential growth and a 3.1% increase year-over-year. The company also noted considerable revenue contributions from its artificial intelligence services and strategic partnerships with Xiaomi (OTC:XIACF) and Kingsoft, which accounted for 20% of total revenue.
In terms of future plans, Kingsoft Cloud intends to enhance revenue quality and profitability by reducing costs and expenses. The company is also increasing its investment in the AI sector, with an expectation of higher total CapEx for the year compared to last year. Additionally, the company is exploring opportunities in the electric vehicles and robotics sectors.
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