CoreWeave (CRWV) Is on Wall Street's Radar—But One Analyst Says It's a Trap
CoreWeave, Inc. (NASDAQ:) is one of the 10 AI Stocks on Wall Street's Radar. On June 10, DA Davidson analyst Gil Luria reiterated an 'Underperform' rating on CoreWeave, Inc. (NASDAQ:CRWV) with a $36.00 price target. The firm stated that CoreWeave had disclosed a pro forma contract financing structure example to analysts a day before, which indicated that shareholders will get some returns during the duration of the contracts being signed.
However, it believes that the disclosure, even if accepted at face value, 'very clearly illustrates the exact opposite point.' Luria highlighted how there is no upfront equity and no returns to current equity holders during the contract.
While the company assumes a 15% equity, the analyst also stated that CoreWeave does not have equity capital to invest and is instead relying on other forms of non-project debt. Such a step would require an additional $590 million, which would result in 'literally wiping out any cash they are claiming to generate for shareholders.'
The firm also believes that the illustrative interest rate indicates that all of the company's previous deals are likely unprofitable. Moreover, while AI enthusiasm may likely fuel expansion, it would require the company to raise more than $10 billion in equity capital at the current share price so that it can justify the next two years of projects. This seems as the only significant upside risk to DA's analysis.
While we acknowledge the potential of CRWV as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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