On Tuesday, Compass Point, a financial services firm, raised the stock price target for Core Scientific Inc. (NASDAQ: CORZ) to $26.00, up from the previous target of $20.00. The firm maintained a Buy rating on the stock, signaling confidence in the company's future performance.
The upgrade in the price target is attributed to greater clarity on the company's ability to secure high-performance computing (HPC) contracts and an anticipated customer diversification.
Compass Point expects Core Scientific to diversify its customer base by the end of 2024, potentially as a result of the signing of its Auburn, AL site. The new site is expected to command higher lease rates due to a greater share of upfront capital expenditures, likely to be project financed.
The analyst noted that Core Scientific's updated HPC enterprise value implies a valuation of approximately 12.5 times EV/MW, aligning with private market valuations and offering a substantial discount compared to datacenter real estate investment trusts (REITs). The firm foresees a pathway for Core Scientific to evolve into a datacenter REIT after utilizing its net operating losses (NOLs).
On November 20, Core Scientific announced the approval of lease amendments at its Denton site, which will increase its power access from approximately 297 megawatts (MW) to about 394 MW. By the end of 2024, additional capacity expansions at existing locations are anticipated, with the remaining 270 MW likely to be offered first to Coreweave, a current customer.
Compass Point expressed confidence in Core Scientific's ability to execute on its 400MW mergers and acquisitions pipeline at new sites. The firm projects that Core Scientific will become the world's largest GPU-specific datacenter provider, with the execution of 270MW in the calendar year 2025 and 500MW delivered in 2026. The firm reiterated its Buy rating, anticipating a continued re-rating of the stock in 2025.
In other recent news, Core Scientific Inc. has initiated the construction of a new 100-megawatt data center in Muskogee, Oklahoma, set to power CoreWeave's NVIDIA (NASDAQ:NVDA) GPUs for a confidential client. The data center is part of a larger agreement with CoreWeave, involving a total of 500 megawatts of IT load contracted for high-performance computing (HPC) hosting operations.
Meanwhile, Canaccord Genuity has increased its price target on Core Scientific's shares to $17.00, maintaining a 'Buy' rating. This adjustment comes after CoreWeave's decision to procure an additional 118MW of data center power for AI hosting, bringing the total power under contract with Core Scientific to 500MW.
In other developments, Jefferies, a global investment banking firm, has given Core Scientific a 'Buy' rating, acknowledging the company's successful pivot from Bitcoin mining to building artificial intelligence-focused data centers. This positive outlook reflects confidence in Core Scientific's future business prospects.
Turning to digital mining companies, B. Riley Financial has updated its stock price targets for several firms, including Bitfarms Ltd., HIVE Digital Technologies Ltd., and Stronghold Digital Mining, Inc., citing recent Bitcoin trends. The firm maintains a 'Buy' rating for these stocks.
In other news, Stronghold Digital Mining reported a decline in Bitcoin production and revenue in Q3 2024 and announced a pending merger with Bitfarms, expected to increase operational efficiency and diversify beyond Bitcoin mining.
These developments illustrate the ongoing transformations and strategic shifts within the tech industry, with companies adapting to changing market conditions and expanding their capacities to meet future demands.
InvestingPro Insights
Core Scientific's recent performance aligns with Compass Point's optimistic outlook. According to InvestingPro data, the company has shown significant returns over various timeframes, including a strong return over the last month, three months, and a high return over the last year. This positive momentum is further evidenced by the stock trading near its 52-week high.
InvestingPro Tips suggest that Core Scientific operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could support the company's expansion plans mentioned in the article. However, it's worth noting that the company is not currently profitable over the last twelve months, although analysts predict profitability this year.
The high valuation multiples for EBIT, EBITDA, and revenue, as indicated by InvestingPro Tips, reflect the market's optimistic expectations for Core Scientific's future performance, particularly in light of its potential to become the world's largest GPU-specific datacenter provider.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for Core Scientific, providing a deeper understanding of the company's financial health and market position.
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