CoreWeave stock price has come under pressure in the past few months, despite having some notable catalysts in the data center and artificial intelligence (AI) industry. CRWV was trading at $90, down by 52% from its all-time high, a drop that has erased billions of dollars in value. So, is this former Bitcoin mining company a good buy ahead of earnings?
CoreWeave Has Major Tailwinds Ahead of Earnings
The CRWV stock has remained under pressure despite several major catalysts, including a recent $2 billion investment from NVIDIA, the world’s largest company. This investment made it its second-biggest holder after Magnetar Financial.
CoreWeave is also set to benefit from ongoing artificial intelligence spending, with the four largest American companies pledging to invest over $650 billion in capital expenditures this year. Some of these companies will likely allocate funds to CoreWeave, a top data center operator in the United States.
The most recent results showed that the company has accumulated 41 data centers in the United States, a growth trajectory that will continue this year.
These results showed that it is one of the fastest-growing companies in the US, with revenue rising 134% to $1.4 billion and backlog hitting $55.6 billion. Its adjusted EBITDA rose by 61% to $838 million.
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Wall Street analysts anticipate its revenue will come in at $1.53 billion, bringing its annual revenue to over $5.1 billion, well above the $1.9 billion it reported in the previous financial year.
Most analysts are bullish on the company as the AI boom continues. For example, Deutsche Bank raised its price target from $100 to $140, a 42% increase from the current level. Wells Fargo analysts have a target of $125, while Jefferies has a target of $120.
CRWV Has Major Risks Ahead
Still, the main risk that CoreWeave faces is growing capital expenditure. The management guided its capital expenditure for last year to be between $12 billion and $14 billion. This means that the company will need to keep raising money to build its data centers.
Meanwhile, trouble is brewing in the private credit industry, which has been aggressive in funding data centers. Blue Owl, a company that has funded many projects, has slumped amid lingering concerns about its business. It recently failed to arrange a $4 billion financing for CoreWeave.
The other risk is that OpenAI, its top client, has reduced its planned capital expenditure. It now plans to spend about $600 billion by 2030, down from $1.4 billion previously. It has reset its spending expectations amid concerns about whether it can generate enough revenue to cover its costs.
CoreWeave is also facing significant competition pressure, with companies like Riot Platforms, Bitfarms, Nebius, and TeraWulf gaining market share.
CoreWeave Stock Price Technical Analysis
The daily timeframe chart shows that the CRWV stock price has remained in a tight range in the past few weeks. A closer look shows that it remains below the Supertrend indicator.
Also, it has remained below the Supertrend indicator, a bearish sign in technical analysis. It remains inside the symmetrical triangle pattern, whose two lines are nearing their confluence.
Therefore, the most likely scenario is where the stock remains inside this range after its earnings. A drop may see it drop to the key support level at $63.50, its lowest level in December last year.
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