AI infrastructure firm CoreWeave (CRWV) failed to impress investors as it reported mixed second-quarter results yesterday. Shares fell about 20% in Wednesday’s regular trading session after dropping 9% in yesterday’s extended trading. Following the selloff, Wall Street analysts expressed mixed opinions about CoreWeave’s long-term potential.
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The stock drop was partly due to concerns over a lock-up expiration this week, which could let insiders sell shares. Once that restriction lifts, many of CRWV’s shares could flood the market, leading to increased supply and a lower stock price.
CoreWeave’s Q2 Performance
Nvidia (NVDA)-backed CoreWeave reported $1.21 billion in revenue, beating consensus estimates by over $100 million. However, its loss per share of $0.27 came in wider than expected due to rising interest expenses and heavy infrastructure investment.
Further, CRWV’s Q3 operating income forecast of $160 million to $190 million fell short of Wall Street’s $192 million target, raising concerns about near-term profitability.
Analysts Put Forth Cautious Optimism
Despite the earnings miss, some analysts remain optimistic. Stifel’s Ruben Roy bumped his target to $120, while maintaining a Hold rating. The five-star analyst praised the revenue beat and robust demand but warned that margin pressure and dilution risks from the Core Scientific (CORZ) deal could cap upside.
At the same time, Michael Turrin from Wells Fargo raised his price target to $105 from $60, citing strong demand, a $30 billion backlog, and a raised full-year revenue guide of $5.15 billion to $5.35 billion.
On the other hand, analyst Bradley Sills from Bank of America lowered his price target to $168 from $185 with a Hold rating. He noted that a 4% quarter-over-quarter increase in backlog (excluding OpenAI) was underwhelming. He also noted uncertainty around the Core Scientific acquisition and the lock-up expiration as near-term risks.
However, in the long term, he still believes CoreWeave is well-positioned to benefit from the growing demand for AI infrastructure.
What’s Ahead for CoreWeave?
CoreWeave is rapidly scaling to meet growing AI demand, aiming to reach 900MW in data center capacity by year-end. The company is signing deals with OpenAI, Microsoft (MSFT), and Meta (META), and it is building a strong backlog.
Interestingly, CEO Michael Intrator said that demand continues to outpace supply, and the firm is expanding rapidly to meet it. The acquisition of AI developer platform Weights & Biases and a proposed deal with Core Scientific reflect CoreWeave’s efforts to strengthen its presence in the AI cloud space.
However, CRWV’s aggressive growth comes with high costs and execution risks. Also, the lock-up expiration could trigger insider selling, while regulatory scrutiny around its M&A strategy and elevated interest expenses may weigh on margins.
Is CRWV a Good Stock to Buy?
Turning to Wall Street, analysts have a Hold consensus rating on CRWV stock based on six Buys, 14 Holds, and two Sells assigned in the past three months. Further, the average CoreWeave stock price target of $120.33 per share implies 1.75% downside risk.
