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On Thursday, Citi analyst Tyler Radke maintained a Neutral rating on CoreWeave (NASDAQ:CRWV) with a steady price target of $43.00. Radke acknowledged the company’s impressive revenue performance in its first quarter as a publicly traded entity, which exceeded expectations by 15 percentage points and showcased a remarkable year-over-year growth of 420%. This surge was attributed to CoreWeave capitalizing on a significant backlog of demand for AI services. With a market capitalization of $31.31 billion and trading near its 52-week high of $68.50, InvestingPro analysis suggests the stock is currently overvalued.
Despite the robust revenue figures, Radke noted that not all financial metrics met expectations. The company’s capital expenditures (Capex) fell short at $1.9 billion compared to the anticipated $2.6 billion. Additionally, CoreWeave’s Remaining Performance Obligations (RPO) saw a modest quarter-over-quarter decline. However, this did not account for the OpenAI contract and an expected $4 billion expansion in the second quarter. According to InvestingPro data, the company maintains a healthy gross profit margin of 74.24%, though its current ratio of 0.39 indicates potential liquidity challenges.
The analyst also pointed out mixed results in profitability metrics. Adjusted EBIT margins came in below expectations, and earnings per share (EPS) as well as net income were significantly lower than anticipated, owing to increased interest expenses due to less capitalization.
Looking forward, CoreWeave’s guidance suggests a continuation of strong revenue growth ahead of market expectations. Yet, this appears to come at the cost of profitability targets. Radke suggested that the recent uptick in CoreWeave’s share price, combined with the potential for downward revisions in bottom-line forecasts, could lead to a decrease in share value in the near term.
In other recent news, CoreWeave has significantly expanded its financial capacity by amending its existing credit agreement, increasing its revolving credit facility from $650 million to $1.5 billion. This move enhances CoreWeave’s borrowing capacity and extends the maturity of the facility to May 2, 2028, with a potential earlier date contingent on certain conditions. Additionally, CoreWeave is reportedly in talks to raise approximately $1.5 billion in debt through high-yield bonds, with JPMorgan Chase (NYSE:JPM) & Co. potentially leading the effort. This comes after the company scaled down its initial public offering from a planned $4 billion to $1.5 billion due to market volatility.
Northland has initiated coverage of CoreWeave with an Outperform rating and a price target of $80, citing the company’s strong pricing strategies and long-term financial health. The firm projects a 31% long-term free cash flow margin and expects CoreWeave to capture a 10% market share in the AIaaS market by 2025. On the other hand, Macquarie has set a Neutral rating with a $56 target, highlighting CoreWeave’s proprietary Cloud Platform as a key differentiator in the AI cloud reselling market. Macquarie notes that CoreWeave’s current contracted client commitments, valued at approximately $27 billion, are expected to support revenue growth through 2030. These developments reflect CoreWeave’s strategic positioning and efforts to strengthen its market presence amidst ongoing financial maneuvers.
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