2 min read
So much for a bullish tone from Elon Musk on AI demand during his SpaceX (SPCX) earnings call, arresting the slide in CoreWeave (CRWV) and other neocloud stocks.
At least as seen through the eyes of one of Wall Street’s biggest CoreWeave bears.
Bernstein analyst Madison Rezaei slashed her price target on the stock to $51 from $74 on Thursday and maintained an Underperform rating.
“We caught a lot of hate when we initiated on CRWV with a $56 price target seven months ago. Today, it’s a lot harder to find bulls—certainly some of them just don’t call us anymore, but there seems to be more broad acceptance of the challenges of this business model. Could this turn around? Maybe: it’s a wildly volatile, momentum-driven stock, but barring major moves, the fundamentals are probably stuck,” Rezaei said.
If there is any positive for the CRWV bulls, Rezaei doesn’t think the stock is headed to $0.
“We do not believe CRWV is a 0—they still have a large backlog, line of sight to powered shell delivery, and while we don’t think the contracts are super attractive, they’re not underwater. Whether Nvidia (NVDA) will step in is meatier; we think they would intervene in a true downside. Doesn’t necessarily re-energize the stock, but raises the floor,” she added.
CoreWeave’s stock has been torched in October to the tune of 28%. Shares lost 6% in pre-market trading today.
61.82 -0.31 (-0.50%)
At close: October 21 at 4:00:00 PM EDT
58.79 -3.03 (-4.90%)
Pre-Market: 6:22:32 AM EDT
The company’s corporate bonds across maturities continued to be dumped amid fears of an AI slowdown and its implications for the company’s precarious balance sheet. That has triggered a subsequent sharp sell-off in the stock.
The rise in yields on CoreWeave’s bonds even spurred Elon Musk to post “Yikes” on X in response to a post by venture capitalist Chamath Palihapitiya last week.
Meanwhile, in a new report, Gartner forecast that by 2030, “cost pressure and a lack of a differentiating business model will force over 80% of neocloud providers to cease independent operations.”
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team.
