On Thursday, Mizuho Securities updated its assessment of Kuaishou Technology (1024:HK), increasing the price target to HK$90.00 from the previous HK$85.00, while reaffirming a Buy rating for the stock. The decision followed Kuaishou's financial results, which revealed a substantial net income beat, attributed to efficiencies across the company's operations.
Kuaishou reported revenue figures that slightly exceeded analysts' forecasts, but it was the net income figures that stood out, surpassing expectations by approximately 40%. This performance was largely due to the company's effective cost management and the implementation of artificial intelligence (AI) technologies, which contributed to margin expansion and cash flow generation.
The firm's analysis highlighted Kuaishou's strategic positioning, with its focus on users in lower-tier markets and advancements in advertising technology infrastructure. Additionally, the company's efforts to enhance its content and e-commerce shopping experience were noted as factors likely to help Kuaishou capture a larger share of the commerce and advertising markets.
In light of these results, Mizuho has adjusted its forecasts for Kuaishou's future earnings before interest, taxes, depreciation, and amortization (EBITDA). The firm raised its FY24 and FY25 EBITDA estimates by 5% and 4%, respectively, and introduced a new FY26 EBITDA estimate of RMB 39.7 billion.
The updated price target also takes into account Kuaishou's recent announcement of a new HK$16 billion share buyback program, which is expected to provide additional support to the company's stock value. Mizuho's valuation of Kuaishou now reflects an 8.5x multiple of the newly projected FY26 EV/EBITDA.
InvestingPro Insights
Kuaishou Technology's recent financial beat and Mizuho Securities' subsequent price target increase reflect a company on the rise. Here, we provide some InvestingPro Insights that may further inform investors about the company's financial health and market valuation.
InvestingPro Data shows that Kuaishou holds a market capitalization of $731.68M USD, with a P/E ratio of 29.63. This valuation comes despite a P/E ratio adjusted for the last twelve months as of Q1 2024 at 30.69, indicating a premium valuation relative to near-term earnings growth. The company's revenue growth has been impressive, with a 21.25% increase over the last twelve months as of Q1 2024, and a gross profit margin of 47.36%, highlighting efficient operations and potentially sustainable profitability.
InvestingPro Tips reveal that Kuaishou not only has raised its dividend for 3 consecutive years but also holds more cash than debt, suggesting a strong balance sheet. Moreover, the company's liquid assets exceed its short-term obligations, providing financial flexibility. This is particularly relevant as Kuaishou embarks on a new HK$16 billion share buyback program, which could further enhance shareholder value.
For readers interested in a deeper dive into Kuaishou's financials and future outlook, InvestingPro offers additional tips and insights. There are a total of 9 InvestingPro Tips available for Kuaishou, including analyses on profitability this year and over the past twelve months, as well as its strong return over the last three months. To explore these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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