Needham has downgraded CoreWeave (CRWV) from a Buy to a Hold following the AI company’s $9 billion all-stock acquisition of data center infrastructure provider Core Scientific (CORZ). While analysts led by five-star-rated Mike Cikos admitted that the deal has strategic benefits, such as stronger infrastructure and a larger capacity to serve customers, they believe that the stock’s current valuation leaves little room for upside. As a result, Needham also removed its previous price target of $78.
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According to the analysts, the acquisition is expected to unlock between 150MW and 200MW of additional IT capacity, which is valuable for CoreWeave’s growing high-performance computing and AI workloads. It also gives CoreWeave ownership of high-quality infrastructure, allows the use of asset-backed securities for more efficient financing, and could save the company around $500 million in annual operating expenses. Additionally, the deal brings data center operations in-house, thereby improving control and efficiency.
Nevertheless, despite these positives, Needham believes that most of the benefits are already priced into CoreWeave’s stock, which led to the downgrade. Shares of both CoreWeave and Core Scientific fell about 1% following the announcement. It is also worth noting that other brokerage firms lowered their ratings on CoreWeave earlier this week, which indicates that the broader market is skeptical about the valuation and long-term payoff of the acquisition.
Is CRWV a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on CRWV stock based on six Buys, 11 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average CRWV price target of $78.53 per share implies almost 50% downside risk.
