Analyst Daley Li of Bank of America Securities reiterated a Hold rating on Kingsoft Cloud Holdings Ltd (3896 – Research Report), with a price target of HK$6.70.
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Daley Li has given his Hold rating due to a combination of factors impacting Kingsoft Cloud Holdings Ltd. The company’s 1Q25 revenue showed an increase year-over-year but a decline quarter-over-quarter, which fell short of both Bloomberg consensus and Bank of America’s expectations. Despite this, the adjusted EBITDA margin improved significantly, driven by the growth of the AI business, which offers better margins. However, the gross profit margin experienced a decline due to a shift in revenue mix towards the cloud business, which has lower margins, and increased competition in the AI cloud sector.
Looking ahead, while there is potential for further adjusted EBITDA margin improvement and revenue growth in the upcoming quarters, the company faces challenges such as softer demand in the enterprise cloud segment and pricing pressures in the cloud market. These factors contribute to profitability pressures despite strong top-line growth, leading Daley Li to maintain a Neutral stance with a price objective of HK$6.70.