With top-tier partnerships, optimistic revenue prospects, and the market's renewed enthusiasm for artificial intelligence, the company's stock price has repeatedly hit record highs, and even some criticism on Wall Street has failed to stop its momentum. Shares have gained for four consecutive sessions before closing at all-time highs. The stock has more than doubled since its initial public offering (IPO) at $40 a share in late March.
The Citi research team led by Tyler Radke raised its price target to $94 from $43 while maintaining a "neutral, high-risk" rating. The news pushed the stock up 19% to close Wednesday at $107.39. Analysts pointed out that CoreWeave's first quarterly financial report as a listed company exceeded expectations, which should ease market concerns about its weak demand.
The earnings report reinforces the hyperscale cloud computing company's high-growth image and "may dispel investor concerns about a slowdown in AI capex/infrastructure," analysts wrote in the report. They raised their forecasts for the company's second-quarter and full-year revenue, while lowering the discount to its valuation.
Bullish investors were cheered by the news that CoreWeave reached a deal worth up to $4 billion with industry leader OpenAI last Thursday to provide it with more cloud computing power. Although the gains were once retreated that day due to an analyst's downgrade report, the next day due toNvidia(NVDA.US) disclosed a larger-than-expected stake in the company, and its stock jumped 22% to a new high.
This week, Nvidia's dynamics further pushed CoreWeave's stock price to continue to rise. Nvidia CEO Jensen Huang announced at Computex, Asia's largest electronics forum, plans to allow customers to use rival chips in data centers built on his technology, a statement that was also seen asMicrosoftResponse to the internal R&D needs of major customers.
However, it's worth mentioning that Wall Street's skeptics are still in the majority. According to analyst data tracked by Bloomberg, eight recommended a hold, two recommended a sell, and another eight recommended a buy.
Bears point to CoreWeave's mixed earnings performance, which caused the stock price to fall early in the earnings release, and the company relied on only a few customers for revenue. Last Thursday, D.A. Davidson downgraded CoreWeave, comparing the company to office space-sharing business WeWork, saying it is "unworthy of scale expansion," and the only day the stock has fallen in the past eight sessions.
Analysts have an average price target of $67 on the stock, implying that its shares could fall nearly 40% over the next 12 months. In addition, the stock's low liquidity may have overstated some of its upside, with only 13% of its outstanding shares currently available for trading, according to data compiled by Bloomberg. At the same time, short interest in the market remains high, with more than 40% of the outstanding shares being used short, according to S3 Partners LLC.
Even as Citi raised its price target, analysts reiterated their neutral rating and acknowledged that some of the recent gains were justified given strong data from hyperscale cloud computing enterprises and Microsoft Azure.
"We want to see more progress from the company in terms of profitability and customer diversification," Radke said.
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