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On Thursday, Citi has upgraded Kingsoft Cloud stock (NASDAQ:KC) from Neutral to Buy, while keeping the price target steady at $5.00. The decision comes after the company’s fourth-quarter 2023 results matched consensus revenue and adjusted earnings expectations.
Kingsoft Cloud’s return to revenue growth following the streamlining of its low-margin business and an improvement in EBITDA margins, attributed to operational efficiency and business optimization, were key factors in the upgrade.
The analyst from Citi noted that they anticipate moderate revenue growth for Kingsoft Cloud as the optimization process concludes. They also expect margins to continue improving, driven by an increased contribution from AI-related revenues. While revenue estimates remain largely unchanged, forecasts for margins in 2024 and 2025 have been raised to reflect the better-than-expected margin improvement.
The analyst expressed optimism for potential incremental demand spurred by the large-scale rollout of WPS AI products and the launch of Xiaomi (OTC:)’s electric vehicle, which could further support the company’s growth trajectory.
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