CoreWeave's 290% Rally Raises Valuation Fears, Analyst Says 'Upside Has Been Priced In'

Core Viewpoints - CoreWeave Inc. has been downgraded from Buy to Neutral by Bank of America analyst Brad Sills due to valuation concerns after a significant share price increase following its March IPO [1][2] - The price target for CoreWeave has been raised from $76 to $185, indicating that the analyst believes much of the near-term upside has already been priced into the shares [1][2] Valuation and Financial Performance - CoreWeave's stock has increased by 145% since the release of its first-quarter financial results, raising concerns about overvaluation [2] - The company is currently trading at a premium of 25x its enterprise value divided by EBIT, which raises concerns about its valuation [3] Competition and Funding Concerns - The analyst expressed concerns regarding CoreWeave's need for "significant debt funding" to support its capital expenditures and revenue growth, especially in a competitive landscape with larger companies like Microsoft, Alphabet, and Amazon [3] - These larger competitors have greater scale and can more easily allocate capital for their own capital expenditures [3] Positive Developments - Despite the downgrade, the analyst noted several positive aspects of CoreWeave, including new hyperscaler customers, expansion with OpenAI, and a recent debt raise at a lower interest rate [4] - CoreWeave signed a $4 billion expansion deal with OpenAI, increasing the total contract value to $15.9 billion [5] - The forecast for capital expenditures in AI infrastructure is projected to reach $206 billion by calendar year 2027, growing at a rate of 4% year-over-year [5] Stock Performance - CoreWeave's stock price increased by 5.3% to $155.11 on Monday, with shares having risen 290% since the IPO [6]