Is Kuaishou Technology (SEHK:1024) Still a Buy After a 63.5% YTD Rally?

The recent 63.5% year-to-date rally in Kuaishou Technology (SEHK:1024) has sparked debate among investors about whether the stock remains undervalued or if the surge has already priced in long-term optimism. With the current share price at approximately 74.05 HKD and an average analyst price target of 88.61 HKD as of November 2025, the stock still offers a potential 37.5% upside, suggesting valuation dislocation persists despite the sharp rise. However, this optimism must be weighed against Kuaishou's evolving AI-driven monetization strategies, regulatory headwinds, and intensifying competition in the AI content generation space.

Valuation Dislocation: A Tale of Two Metrics

The gap between Kuaishou's current price and analyst price targets highlights a key question: Is the market underestimating the company's long-term potential? While the stock has surged, the average price target of 88.61 HKD implies analysts still see material room for appreciation. This divergence could reflect skepticism about short-term risks, such as regulatory pressures and competitive dynamics, which may not yet be fully priced in. For instance, UBS and Orient Securities have set higher targets of 95 HKD and 103.06 HKD, respectively, underscoring confidence in Kuaishou's ability to scale its AI-driven revenue streams according to Tipranks. Conversely, the lower end of the target range (66 HKD) suggests some analysts remain cautious about near-term challenges.

Earnings Outperformance and AI-Driven Monetization

Kuaishou's Q3 2025 earnings results provide a compelling case for growth sustainability. Total revenue rose 14.2% year-over-year to RMB35.6 billion, driven by robust performance in online marketing services and e-commerce. Net profit surged 37% to RMB4.49 billion, exceeding market expectations. The company's AI initiatives, particularly the Kling AI 2.5 Turbo Model, have been pivotal. By reducing creators' per-video generation costs by 30%, the model has enhanced user engagement and operational efficiency, contributing to a 15.2% year-over-year increase in e-commerce GMV to RMB385.0 billion.

However, the live streaming segment, which historically has been a key revenue driver, grew only 2.5% YoY, signaling potential saturation or shifting user preferences. Kuaishou's R&D expenses increased by 17.7% year-over-year as the company invests heavily in AI and computing power according to Q3 results, which could temporarily pressure margins. Yet, these investments appear justified given the global demand for AI tools. With 70% of Kling AI users based outside China, the company is tapping into a total addressable market estimated at $60 billion in a bullish scenario.

Regulatory and Competitive Risks: A Double-Edged Sword

Despite its AI-driven momentum, Kuaishou faces significant regulatory and competitive challenges. In 2025, the Cyberspace Administration of China (CAC) disciplined Kuaishou for content management lapses, while the State Administration for Market Regulation (SAMR) launched an investigation into its e-commerce unit for suspected violations of the E-commerce Law. These actions highlight the risks of operating in a sector where content governance is increasingly scrutinized. Additionally, China's AI labeling regulations require platforms to invest in compliance measures, which could divert resources from growth initiatives according to regulatory analysis.

Competitively, Kuaishou's dominance in AI video generation is being challenged by global players like Google's Veo 3. While Kuaishou's Kling AI model is ranked the world's No. 1 text-to-video and image-to-video tool according to AI benchmarking, the rapid evolution of AI tools threatens to erode its first-mover advantage. The company's ability to differentiate through Clean AI applications and international expansion will be critical to maintaining its edge.

Is the Rally Justified? A Balanced View

The 63.5% YTD rally reflects investor optimism about Kuaishou's AI monetization potential and its strong Q3 earnings. However, the stock's current price still lags behind analyst price targets, suggesting the market may not have fully priced in the company's long-term prospects. Kuaishou's strategic investments in AI, coupled with its leadership in e-commerce and international markets, position it to capitalize on the $60 billion AI content generation opportunity according to Morningstar analysis. That said, regulatory enforcement actions and competitive pressures could temper growth in the near term.

For investors, the key question is whether Kuaishou's management can navigate these risks while sustaining its AI-driven revenue growth. If the company can maintain its innovation edge and address regulatory concerns effectively, the stock's current valuation dislocation may present a compelling entry point. Conversely, any missteps in compliance or execution could widen the gap between the current price and long-term potential.

Conclusion

Kuaishou Technology remains a buy for investors with a medium-term horizon, provided they are willing to accept the risks associated with regulatory scrutiny and competitive intensification. The stock's valuation dislocation, combined with its strong earnings performance and AI-driven monetization strategies, suggests the rally has not yet fully priced in its long-term potential. However, close monitoring of regulatory developments and the company's ability to innovate in the AI space will be essential for assessing its future trajectory.