‘The Market Overreacted,’ Says Top Investor About CoreWeave Stock

The market reaction to mergers and acquisitions can be a pretty telling signal – suggesting that the deal will either benefit the parties or be turn into a bit of a boondoggle. Thus far, the market has not reacted too positively to CoreWeave’s (NASDAQ:CRWV) recent acquisition of Core Scientific.

Core Scientific provides AI data center infrastructure, with much of its portfolio already leased by CoreWeave – whose company management touted the money-saving benefits of the close to $9 billion all-stock deal.

For instance, CoreWeave has shared that the deal will allow it to avoid $10 billion in future leases over the next 12 years, while also estimating $500 million in annual cost savings by the end of 2027.

Tell that to a less-than-impressed market. Indeed, since the details of the deal were announced on July 7, CRWV has been plummeting – with the company’s share price having fallen more than 20% over the past week.

One top investor known by the pseudonym Stone Fox Capital thinks the market is overreacting.

“The key investor takeaway is that the market overreacted to a natural deal to eliminate lease obligations and reduce costs while streamlining the implementation of new data center assets,” posits the 5-star investor, who is among the top 3% of TipRanks’ stock pros.

Stone Fox believes that the transaction makes plenty of sense, since it provides CoreWeave with “direct control” over data center assets. This will both promote quicker, more effective AI infrastructure deployments while improving efficiencies.

“The operational savings will virtually cover the costs of the deal alone,” the investor adds.

Stone Fox explains that this dip is therefore a great opportunity for investors, who can now acquire CRWV for 4x 2027 revenue targets. The investor remains bullish on CRWV for in the coming months, though the investor does caution that a lock-up expiration in three months could cause heavy selling pressure.

“Investors should use the recent weakness in CoreWeave to load up on the AI hyperscaler with the opportunity for a major rally prior to the lock-up expiration and Core Scientific deal close late this year,” concludes Stone Fox Capital, who rates CRWV a Buy. (To watch Stone Fox Capital’s track record, click here)

Wall Street offers a mixed picture, with 11 Holds outpacing 6 Buys and 1 Sell rating – giving CRWV a consensus Hold (i.e. Neutral) rating. Its 12-month average price target of $78.53 has a downside of ~38%, suggesting that analysts will likely be changing their ratings or their price target, or perhaps both. (See CRWV stock forecast)

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