CoreWeave Faces Wall Street Doubts Despite Analyst Support

CoreWeave’s stock experienced a significant decline on Wall Street following the company’s downgrading of its full-year revenue guidance. The stock fell by more than 12% on Tuesday, March 12, 2024, leading it to become the most discussed ticker on Stocktwits. This downturn occurred despite some analysts, notably from Morgan Stanley, identifying potential opportunities within the company’s operational framework.

Guidance Cut and Analyst Reactions

CoreWeave revised its full-year revenue forecast to a range of $5.05 billion to $5.15 billion, a reduction from the previous estimate of $5.15 billion to $5.35 billion. This decision stemmed from supply chain delays attributed to a third-party data center provider, which also prompted JPMorgan to downgrade the stock from ‘Overweight’ to ‘Neutral,’ setting a new price target of $110. JPMorgan acknowledged CoreWeave’s “very robust” bookings yet expressed concerns regarding the increased difficulty in predicting the company’s short-term performance.

Despite the negative sentiment from some analysts, Morgan Stanley’s analyst, Keith Weiss, raised the firm’s price target on CoreWeave to $99, up from $91. Weiss highlighted the strong demand for GPU capacity against a backdrop of limited supply, suggesting that this scenario presents unique opportunities for CoreWeave as it seeks to scale its operations rapidly. He cautioned, however, about the execution risks posed by the ongoing supply constraints.

Performance Highlights and Future Outlook

In its recent earnings report, CoreWeave disclosed a loss of $0.22 per share, which was better than the anticipated loss of $0.36 forecasted by Wall Street analysts, according to Koyfin data. The company reported revenue of $1.37 billion, exceeding the consensus estimate of $1.28 billion.

The adjusted operating income projections have also been lowered to between $690 million and $720 million, a decline from the earlier guidance of $800 million to $830 million. This adjustment is primarily linked to delays in power shell delivery from its third-party data center provider, which are expected to have further repercussions on fourth-quarter results.

Other analysts have also adjusted their expectations for CoreWeave. Jefferies reduced its price target from $180 to $155, while maintaining a ‘Buy’ rating. Melius Research cut its target from $165 to $140, and Bank of America trimmed its price target from $168 to $140, retaining a ‘Neutral’ stance.

As CoreWeave navigates these challenges, the market remains divided, with retail sentiment on Stocktwits shifting from ‘bearish’ to ‘extremely bullish’ in recent days. The increased conversation surrounding the stock suggests that while Wall Street may be cautious, some investors see potential in the company’s long-term growth prospects.