JPMorgan has issued a research report upgrading its investment rating on Kuaishou-W (01024) from "Neutral" to "Overweight" and raising its target price to HK$71 from HK$48, valid until December 2026.

The bank anticipates that the value of Kuaishou's Kling AI will be realized within the next 12 months. Based on recent company announcements and news reports, Kling AI's pursuit of external financing is expected to trigger a revaluation of the asset by Kuaishou. JPMorgan currently values Kling AI at $3.5 billion, supported by a projected 2027 price-to-sales (P/S) ratio of 30 times. Kuaishou's current market capitalization is approximately $25 billion.

Furthermore, Kling AI's growth is exceeding expectations. Consequently, the bank has increased its revenue forecasts for Kling AI by 34% for 2026 and 64% for 2027, projecting revenue growth of 250% and 104% for those years, respectively. Demand is robust in the global enterprise and professional consumer markets, with over 70% of Kling AI's revenue generated overseas. Its revenue mix is 60% from API services and 40% from subscriptions.

Simultaneously, the competitive landscape is becoming more favorable. ByteDance's Seedance recently raised prices in the second quarter, while key U.S. peers like Google and OpenAI are focusing more on AI for code generation rather than video creation.

JPMorgan also highlighted that Kuaishou's current share price offers downside protection, noting the company holds $13 billion in net cash, representing 52% of its market value. If this net cash and the value of its stake in Kling AI—valued at $17 billion (JPMorgan applies a 50% holding company discount to Kuaishou's current 100% ownership)—are deducted from the current market cap, the implied trading value for Kuaishou's core short-video business is negative. Despite this, the bank still expects this core business to generate approximately $3 billion in profit in 2026.

The report noted that Kling AI's exponential growth continues, with its revenue in the first quarter of 2026 increasing fourfold year-over-year. Its annualized recurring revenue (ARR) reached $500 million by March 2026 and is projected to surpass $1 billion in the first half of 2027. Kling AI is gradually penetrating both individual video creators and professional video content developers.

JPMorgan's analysis indicates Kling AI's total addressable market (TAM) is $108 billion, primarily in advertising and professional video production, with its current penetration rate below 1%.

The bank expects key catalysts for the share price to include the launch of new Kling AI versions, updates on equity financing, and further growth in ARR. Additionally, a recovery in Kuaishou's core revenue in the second half of 2026 and 2027—driven by factors such as the easing of the high base effect from live streaming in 2027 and accelerated growth in AI short drama advertising in late 2026—is also anticipated to support the stock price, despite tough comparisons from last year's e-commerce performance.