Live Streaming And E-Commerce Strength Will Drive Future Market Expansion

Key Takeaways

• Adoption of advanced AI and expansion into digital goods and live e-commerce are driving higher user engagement and stronger long-term profitability.
  
• Growth in lower-tier cities and international markets, along with enhanced advertising solutions, is supporting revenue expansion and improved monetization efficiency.
  
• Rising competition, regulatory challenges, shifting user behavior, and reliance on low-margin segments threaten Kuaishou's profitability, growth prospects, and ability to diversify revenue streams.

Catalysts

An investment holding company, provides live streaming, online marketing, and other services in the People’s Republic of China.

• Rapid growth in average daily active users (DAUs) and time spent, driven by expanding mobile internet access and deepening penetration in lower-tier Chinese cities and international markets like Brazil, indicates a growing total addressable market, supporting sustained topline revenue growth.
  
• Accelerating investment and integration of advanced AI technologies (Kling AI, OneRec, large language models) are enhancing content creation, recommendation algorithms, and advertising efficiency, which should improve user engagement, boost ARPU, and drive margin expansion over time.
  
• Increased digital ad spending as a share of global advertising budgets, combined with improved ad load rates, smarter targeting, and expanding online marketing verticals (local services, automotive, e-commerce), is set to drive higher advertising revenue and monetization efficiency in the medium to long term.
  
• Diversification into higher-margin business streams such as AI-powered services (Kling AI), digital goods, and live e-commerce is creating new revenue pools and supporting an uplift in blended net margins and overall profitability.
  
• Ongoing expansion and evolution of the creator ecosystem-including more KOLs, professional content production, and influencer-driven e-commerce-leverages rising demand for user-generated short-form video, fostering greater platform stickiness and supporting stronger long-term revenue and earnings growth.

Kuaishou Technology Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Kuaishou Technology's revenue will grow by 6.4% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 12.2% today to 10.5% in 3 years time.
• Analysts expect earnings to reach CN¥18.2 billion (and earnings per share of CN¥4.22) by about July 2029, up from CN¥17.5 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting CN¥29.1 billion in earnings, and the most bearish expecting CN¥14.4 billion.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 19.1x on those 2029 earnings, up from 8.9x today. This future PE is greater than the current PE for the HK Interactive Media and Services industry at 9.8x.
• Analysts expect the number of shares outstanding to grow by 0.39% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.6%, as per the Simply Wall St company report.

Risks

• Intensifying competition in the Chinese interactive media and e-commerce space-particularly from leading rivals such as Douyin (TikTok China) and other digital platforms-may force Kuaishou to increase customer acquisition and retention costs, as well as ramp up marketing spend and product innovation. This could compress net margins and make it more challenging to sustain long-term profit growth.
  
• Regulatory risks remain persistent, as increasing scrutiny and evolving internet content regulations in China-such as tighter controls on streaming, e-commerce, AI-generated content, and data privacy-could introduce unanticipated compliance or operational costs, limiting content diversity, risking revenue volatility, and potentially impacting future earnings.
  
• There is potential for user growth and engagement to stagnate due to maturing penetration in core Chinese markets and changing consumer behavior, particularly if new forms of content consumption (e.g., immersive or AI-generated formats) shift user time away from traditional short video/social platforms. This could reduce monetization opportunities and put pressure on ARPU and topline revenue.
  
• Kuaishou's heavy dependence on relatively low-margin segments, including live streaming and virtual gifting, poses a structural challenge as it seeks to scale higher-margin advertising and e-commerce revenues. Difficulties in successfully transitioning the revenue mix or fully monetizing pan-shelf-based e-commerce (not yet at scale) may constrain improvements in blended profitability and earnings quality over time.
  
• Strategic shifts by global advertisers away from China-based platforms due to heightened geopolitical tensions and greater data privacy concerns could restrict Kuaishou's online marketing revenue growth, especially in international markets. This would directly impact overall revenue sustainability and long-term investor confidence.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of HK$69.91 for Kuaishou Technology based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HK$100.7, and the most bearish reporting a price target of just HK$47.75.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be CN¥173.6 billion, earnings will come to CN¥18.2 billion, and it would be trading on a PE ratio of 19.1x, assuming you use a discount rate of 9.6%.
• Given the current share price of HK$41.6, the analyst price target of HK$69.91 is 40.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.