Kingsoft Cloud Holdings: A Chinese Cloud Services Stock

Kingsoft Cloud Holdings Ltd. (NASDAQ:KC) is a cloud services company based in China. It offers cloud infrastructure, enterprise cloud, and AI-based services to customers primarily in Asia. It went public last year in May by selling 30 million shares at $17, giving it a market value of around $4.8 billion.

The company has performed well since its IPO, as strong demand for cloud computing services drove its revenue during the last year. An increasing number of businesses started operating digitally after the Covid-19 outbreak, fueling demand for cloud services. Moreover, many companies have started turning to cloud service providers like Kingsoft to prevent the need for building and managing their own serves. China’s cloud service market is expected to surpass $80 billion by 2024, significantly higher than $23 billion in 2019, according to figures mentioned in Kingsoft’s prospectus.

If we briefly look at the first-quarterly performance of the company after IPO, its Q2 revenue surged to 1.39 billion yuan, but net loss widened versus the year-ago quarter. For the third quarter ended September 30, Kingsoft posted revenue of 1.7 billion yuan, translating to a surge of about 72 percent on a year-over-year basis. Q3 net loss also narrowed to 105.3 million yuan, as compared to a loss of 350.6 million yuan in Q3 of 2019. Kingsoft’s key customers include China Construction Bank and TikTok owner ByteDance,

Jefferies analyst Thomas Chong recently issued a “Buy” rating for Kingsoft with a price target of $55 per share, saying that the company’s cloud revenue is expected to increase at a compound annual growth rate (CAGR) of over 40 percent between 2020 to 2023. The positive ratings sent Kingsoft shares up nearly 12 percent in the previous trading session. Overall, Kingsoft stock value has increased around 100 percent in less than a year, with its market value exceeding $10.4 billion.