JPMorgan upgrades Kuaishou to overweight, raises target to HKD71

JPMorgan upgraded Kuaishou to overweight, raising its target 48% to HKD71, citing the unlocking value of its AI video generation unit Kling AI.

"Kling AI's plan to seek external financing will trigger a re-rating of the stock," JPMorgan said in a research report dated June 10. The bank values Kling AI at USD3.5 billion, supported by a 30x price-to-sales multiple on expected 2027 revenue.

Kling AI's annual recurring revenue reached USD500 million in March 2026, with first-quarter revenue surging fourfold year over year. JPMorgan expects revenue to grow 250% in 2026 and 104% in 2027, raising its forecasts by 34% and 64%, respectively. More than 70% of Kling AI's revenue comes from overseas markets, split 60-40 between API and subscription sales. The bank estimates Kling AI's total addressable market at USD108 billion, primarily in advertising and professional video production, with penetration below 1%.

Kuaishou holds USD13 billion in net cash, equal to 52% of its market capitalization. After deducting net cash and a 50% holding company discount on its Kling AI stake, the implied value of the core short-video business is negative, even as JPMorgan expects that segment to generate about USD3 billion in profit in 2026. The bank trimmed its 2026 and 2027 adjusted EPS estimates by 5.4% and 3.3% to RMB3.66 and RMB4.09, respectively, citing a high e-commerce base in the second quarter.

The upgrade signals that JPMorgan expects Kling AI's value to be increasingly reflected in Kuaishou's share price as the unit pursues external funding. Investors will watch for new version launches, equity financing updates, and further ARR growth as the next catalysts.

This article is for informational purposes only and does not constitute investment advice.