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Tuesday, Goldman Sachs initiated coverage on CoreWeave (NASDAQ:CRWV) with a Neutral rating and a price target of $54.00, representing significant upside from the current trading price of $35.42. The stock has experienced high volatility, dropping 13.2% in the past week and currently trading near its 52-week low of $33.52. The new price target is based on a 13.9x FY26 EV/EBIT multiple, aiming to reflect the company’s unique position in the market and the challenges it faces due to the current lack of comparable public Gen-AI companies and the market’s tepid response to leverage or Gen-AI. InvestingPro analysis reveals 13 additional key insights about CoreWeave’s potential.
CoreWeave, which specializes in providing cloud solutions for artificial intelligence and machine learning workloads, has over $26 billion in remaining performance obligations (RPO) and operates on a ratable revenue model. The company has demonstrated remarkable revenue growth of 736% in the last twelve months, generating $1.9 billion in revenue with a strong gross profit margin of 74.2%. These factors underpin the company’s potential growth trajectory. Nevertheless, Goldman Sachs notes that CoreWeave’s recent short operating history and the prevailing economic uncertainties necessitate consistent performance in several areas for the stock to move beyond its current trading range. For deeper insights into CoreWeave’s financial metrics and growth potential, InvestingPro subscribers can access comprehensive analysis and valuation tools.
The firm highlighted the importance of CoreWeave’s ability to maintain strong revenue growth, particularly by diversifying its customer base. Currently, a significant portion of CoreWeave’s revenue is concentrated with two major customers, Microsoft (NASDAQ:MSFT) and Nvidia (NASDAQ:NVDA), which are projected to account for 77% of the company’s 2024 revenue.
Additionally, sustainability in capital expenditure (CapEx) investments is critical. CoreWeave must demonstrate efficiency in its asset deployment and expand its services to improve its return on net assets. This strategy could help the company in scaling its operations effectively.
Lastly, the management of CoreWeave’s increasing debt is a point of focus. Goldman Sachs estimates that the company’s debt could rise to more than $36 billion by 2027, a 4.5-fold increase from current levels. The company’s current total debt stands at $10.6 billion, with short-term obligations exceeding liquid assets, as indicated by a current ratio of 0.39. To navigate this, CoreWeave will need to prove that its approach to revenue-backed financing can lead to a reduction in the cost of capital, aligning it closer to the low-single digit levels seen by hyperscalers, as opposed to CoreWeave’s current 11.8% as of December. InvestingPro’s Financial Health Score of 2.46 (FAIR) provides additional context for investors evaluating the company’s debt management strategy.
In other recent news, CoreWeave has attracted significant attention from several major investment firms. Stifel analysts initiated coverage of CoreWeave with a Buy rating, setting a price target of $55.00, highlighting the company’s position in the rapidly growing AI compute infrastructure market. Jefferies also issued a Buy rating with a $51.00 price target, noting CoreWeave’s strong positioning to meet the increasing demand for AI compute capabilities. Meanwhile, Barclays (LON:BARC) began coverage with an Overweight rating and a $48.00 price target, citing the company’s promising growth prospects in the genAI optimized IaaS sector. Morgan Stanley (NYSE:MS), however, gave CoreWeave an Equalweight rating and a $46.00 price target, pointing out potential risks such as high debt and customer concentration.
In other developments, reports suggest that Google (NASDAQ:GOOGL) is in advanced discussions to lease Nvidia AI chips from CoreWeave, reflecting the ongoing demand for AI resources. CoreWeave’s strategic partnership with Nvidia and its ability to rapidly establish AI-centric data centers have made it a focal point for companies like OpenAI and Meta Platforms (NASDAQ:META). This potential agreement with Google highlights CoreWeave’s unique position in the AI market and its ability to address supply challenges faced by major tech companies. These recent developments underscore CoreWeave’s pivotal role in the expanding AI infrastructure landscape.
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