Kingsoft Cloud is transforming into an artificial intelligence cloud player. According to Morgan Stanley, this should push the company’s stock price higher. The investment bank initiated coverage of Kingsoft Cloud with an Overweight rating. He also has a $15 price target on the stock, implying a 64% upside from Monday’s closing price. “We like Kingsoft Cloud’s early and solid transition from a mid-tier commodity cloud player to an AI cloud, with rapidly accelerating AI revenue and improving profitability, supported by strong ecosystem support from Xiaomi and Kingsoft Group,” analyst Yang Liu said in a note to clients. “KC’s timely transition and early all-in AI strategy positions it well in the AI era among China’s 10 major public cloud players.” Kingsoft Cloud has demonstrated strong pricing power as the global chip shortage disrupts other AI companies, and is positioned to continue to add upside to the stock, Liu said. According to the bank, the company also stands to benefit from strategic partnerships with several AI giants, including an agreement to provide core infrastructure for Xiaomi’s AI ecosystem and smart home platform. In addition to that, the company has recorded increased revenue from various key customers, which should ultimately lead to an increase in the stock price, Liu added. More broadly, the cloud company has strong cash flow, which should “relieve balance sheet constraints” and sustain stock price gains, the analysts wrote. Morgan Stanley’s call is consistent with the consensus on the street. All 11 analysts covering KingSoft rate the stock as a buy or strong buy, according to LSEG data. The stock price has fallen nearly 12% since the beginning of the year. The stock rose 3% premarket on the bullish call.
