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On Thursday, DA Davidson analyst Gil Luria adjusted the firm’s stance on CoreWeave (NASDAQ:CRWV), moving the rating from Neutral to Underperform while maintaining a price target of $36.00. The revision comes amid concerns about the company’s scalability and potential market challenges ahead. The stock, currently trading at $67.46, sits near its 52-week high of $68.50, with InvestingPro data indicating the shares are trading above their Fair Value.
Luria’s assessment pointed to a valuation pegged at three times the calendar year 2026 (CY26) revenue, which underpins the $36 price target. The analyst’s concerns appear warranted, as InvestingPro data shows the company burning through cash rapidly with a negative free cash flow yield and current ratio of 0.39, indicating potential liquidity challenges. The analyst drew parallels with investor sentiment towards WeWork (OTC:WEWKQ), suggesting that investors might be hesitant to scale CoreWeave in a similar manner. The downgrade reflects a cautious outlook on the company’s prospects.
The analyst also noted that while CoreWeave’s shares might have limited short-term downside due to a small float and a high cost to borrow, this dynamic could shift. The anticipated change is likely to occur following the expiration of the lockup period, a time when insiders and early investors are typically restricted from selling their shares. Furthermore, the company might face the need to issue secondary offerings to raise additional capital, particularly given its net loss of $937.76 million in the last twelve months and significant debt burden of $10.62 billion.
Luria’s commentary on the downgrade emphasized the potential risks associated with the stock. "We are downgrading to UNDERPERFORM from Neutral and maintain a $36 price target based on 3x CY26 revenue. Investors regretted scaling WeWork, and they may not want to scale this business," Luria stated.
The analysis by DA Davidson suggests that CoreWeave could encounter headwinds in the near future, especially as the lockup period expires, which may lead to an increase in the number of shares available for trading and potentially more pressure on the stock price. The firm’s unchanged price target of $36.00 remains in effect despite the downgrade to Underperform.
In other recent news, CoreWeave reported impressive first-quarter earnings, with revenue reaching $982 million, a 420% year-over-year increase, surpassing analysts’ expectations of $851.5 million. This strong performance was highlighted by major contract wins, including a $11.9 billion strategic agreement with OpenAI and a $4 billion expansion deal with a major AI enterprise. Following these results, several analyst firms adjusted their outlooks. Mizuho (NYSE:MFG) raised its price target for CoreWeave stock to $70, citing the company’s potential in the AI cloud market, while Stifel increased its target to $75, noting the firm’s pioneering status in AI infrastructure.
BofA Securities also raised its price target to $76, emphasizing CoreWeave’s growing return on net assets. Despite these positive developments, Citi maintained a Neutral rating with a $43 target, pointing out mixed profitability metrics and lower-than-expected capital expenditures. Northland initiated coverage with an Outperform rating and set a price target of $80, projecting a strong long-term free cash flow margin and significant market share in the AIaaS sector. These recent developments underscore CoreWeave’s robust position in the rapidly expanding AI cloud services market.
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