CoreWeave Pre-earnings Analysis
It’s judgement day for CoreWeave as the young company prepares to report its second ever earnings report since going public. The last time they reported, the stock went for a 200% rally, moving from lows of 60s to all time highs of 187.00. So it goes without saying that they’ve set the bar high for traders looking at the technicals.
But apart from the technicals, let’s talk about what really matters more…the fundamentals. CoreWeave’s current stock prices places them at a market cap of about $70 billion. That is still more than 4x their initial IPO price back in March. Whether or not that’s a “fair” price depends on their ability to generate revenue and eventually post profits and free cash flow. On the revenue side, CoreWeave has lived up to its expectations, reaching 736% growth in 2024 to $1.92 billion, then posting $981 million in the first quarter of this year alone. The company is on track to generate $5.05 billion in 2025, growing revenue by more than 100% from last year.
Despite their phenomenal growth, the company’s biggest pain point is in its cash-burn. Their net income in the first quarter this year was -$314 million, leaving the company with negative free cash flow. Although investors typically focus on revenue much more than free cash flow / profits in the young days of a company, these metrics still matter in the long run. So CoreWeave must give a timeline to profitability if they want to keep investors interested.
Another critical point CoreWeave must address is the concentration of their customer base. Many critics have spoken against the company’s sustainability because more than 60% of their revenue comes from Microsoft’s contract. CoreWeave did expand their customer base thanks to a new contract with OpenAI in recent months, valued at $11 billion over the next five years. This is a good sign, but investors will likely want more to feel secure.
Given what they do and their involvement in advanced AI chips, CoreWeave isn’t likely to lose attention anytime soon. The company still has a robust backlog worth billions and is only trading at a fraction of what big players like Nvidia and AMD are trading at (both of which are directly tied to CoreWeave as it leases out their chips). The reaction to earnings is really unpredictable, but chances are markets will push this to all time highs again.
Option chain analysis:
CoreWeave’s option chain expiring on August 15th currently projects a move of (+/-) $23 from the stock. The direction largely depends on the earnings outcome.