Why Kingsoft Cloud Is Down More Than 40% Today

What happened

Shares of Chinese cloud computing service provider Kingsoft Cloud Holdings (NASDAQ: KC) are lower by 43.7% as of 11:36 am ET on Monday in response to a downgrade from an analyst at JP Morgan. The sell-off, however, merely extends what’s become a long-lived, steep pullback.

So what

It’s not exactly the surprise of the century. Kingsoft had already been on the receiving end of several downgrades since September of last year, driving the stock down 93% between last February’s peak and Friday’s close. Monday’s 32% drubbing only extends that losing streak and, incredibly, isn’t the worst single day shares have suffered of late.

The specifics: A JP Morgan analyst lowered his view of this cloud computing outfit from neutral to underweight, cutting its price target from $ 8 per share to $ 3.50. Still, that target is above Kingsoft’s current price near $ 2.75.

Now what

It’s not exactly a stretch to suggest this stock’s sell-off – and the downgrades helping drive it – has taken on a life of its own, which isn’t terribly unusual for a low-float, low-priced stock (Kingsoft Cloud Holdings’ market cap is now a mere $ 727 million). China’s continued crackdown on its technology companies and the prospect of conflict in Ukraine spreading to other corners of the world may also be weighing on investors’ minds. Kingsoft is one of those marginal, unprofitable names that’s readily sold at the first sign of trouble, and this isn’t exactly the first sign of trouble here.

Image source: Getty Images.

Investors keeping tabs on this company will likely know that, while Kingsoft is still unprofitable, revenue has been growing and its losses have been shrinking. Analysts are calling for more such progress this year and next. Plus, despite the JP Morgan downgrade, the analyst community’s consensus price target near $ 113 is still miles above the stock’s present price.

There’s just too much lingering uncertainty, however, for most investors to tiptoe into this speculative name … at least as things stand right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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