‘Don’t Fall for the Hype,’ Says Investor About CoreWeave Stock

CoreWeave (NASDAQ:CRWV) stock has taken off since its IPO earlier this spring, delivering a blistering pace of growth that has dazzled the market. In just over two months of trading, the share price has surged over 260%.

At first glance, CRWV’s rapid ascent certainly seems to be yet another AI-powered bonanza – and the GPU and CPU compute provider counts heavy hitters Nvidia and Microsoft among its biggest customers.

That strength was reflected in CoreWeave’s first-ever earnings report in May, where the company posted $982 million in sales – marking a 420% year-over-year increase.

However, can this AI success story keep on growing by leaps and bounds? One investor, known by the pseudonym Oakoff Investments, does not believe CRWV’s moment in the sun will last for much longer.

“CoreWeave’s stock surge appears disconnected from sustainable business expansion, signaling potential bubble territory despite impressive Q1 revenue growth and backlog,” explains the 5-star investor.

Oakoff notes that CoreWeave’s time-to-market advantage is likely to be fleeting in nature, while its heavy reliance on two key customers (Microsoft and Nvidia are 77% of the current backlog) leaves the company exposed if either hyperscaler changes direction.

Moreover, the investor questions whether a company like Microsoft would allow itself to be locked into long-term contracts for hardware that could likely become obsolete within a year and a half.

“The firm may be left with expensive, underperforming assets and a growing debt burden,” Oakoff warns.

CRWV stock is now trading at a Forward 2028 Price-to-Earnings multiple greater than 43x, which the investor expects will be imperiled by factors such as asset depreciation and rising competition.

“I’d be very cautious looking at the Q1 and TTM growth rates in top line and backlog – those figures are not enough to justify such a massive rally in CRWV’s valuation multiples,” concludes Oakoff, who is giving CRWV shares a Hold (i.e. Neutral) rating. (To watch Oakoff Investment’s track record, click here)

Shifting to Wall Street, the broader analyst consensus is more mixed. With 7 Buy ratings and 5 Holds, CRWV carries a Moderate Buy consensus. However, even the bulls did not foresee the stock’s sharp rally, as CRWV’s 12-month average price target of $47.42 implies a downside of 65%. We can expect these analysts to be revisiting their price targets in the near future. (See CRWV stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.