The stock of CoreWeave Inc. has quadrupled since the data-center operator’s IPO, and one analyst is leaving the market.
CoreWeave’s (CRWV) “extremely high volatility presents notable risks” to both bullish and negative outlooks, according to Gregg Moskowitz of Mizuho, who downgraded his rating on the company from outperform to neutral on Tuesday. Although he acknowledges “the outsized returns” since CoreWeave’s IPO in late March, he believes the shares are generally valued fairly.
According to Moskowitz, CoreWeave faces additional dangers. The company’s revenue is highly concentrated, to start. In the March quarter, Microsoft accounted for over 72% of the company’s sales.
In a separate statement from the sales team, Jordan Klein, a desk-based analyst at Mizuho, stated that it’s hard “for anyone to justify this valuation even with strong growth and new major contracts from OpenAI and others.”
Despite the downgrading, Moskowitz raised his target price from $70 to $150, which illustrates how much CoreWeave shares have risen in a short amount of time.
The reduction was made one day after CoreWeave revealed plans to acquire infrastructure services firm Core Scientific Inc. (CORZ) for approximately $9 billion in all-stock. Even if Moskowitz is optimistic about that deal, the dangers elsewhere make him less optimistic about the stock as a whole.
“We believe this reflects good value given [CoreWeave’s] ability to verticalize the infrastructure supply chain while driving significant cost synergies and enabling more financing flexibility,” Moskowitz stated.
The agreement was “leverage-neutral,” he continued, because CoreWeave will be covering the cost of Core Scientific’s stock.
Late on Monday, CFRA analyst Angelo Zino began covering CoreWeave’s stock, ranking it as a hold. Although he has reservations about the stock, namely around the end of the lockup period, when insiders who were initially prohibited from selling stock after the IPO will be free to offload shares, he also praised the financial flexibility that would come with the Core Scientific deal.
According to CoreWeave’s IPO prospectus, the lockup period lasts until 180 days from the prospectus’s March 20 date, or until the close of trade on the second day following the business’s second quarter earnings as a public company, whichever comes first.
Tuesday saw a 5.2% decline in the stock.
