Bank of America downgrades CoreWeave after earnings on “near term overhang”

Bank of America analyst Brad Sills cut his price target on shares of CoreWeave to $168 from $185 after the supplier of surge capacity for AI compute reported second-quarter results after the close on Tuesday.

CoreWeave stock is down 14% in Wednesday morning trading.

Sills cited two near-term challenges for the company that prompted him to lower his expected multiple:

1) Not only has CoreWeave’s deal to acquire Core Scientific faced some pushback from the latter’s major shareholders, but he suspects there may be concerns about whether regulators will approve of this vertical integration.

2) CoreWeave’s post-IPO lockup period expires this week.

“We learned little about the status of the Core Scientific deal, and speculation on regulatory scrutiny is likely to remain an overhang,” he wrote. “Finally, the lockup expires on Friday, which is likely to place pressure on the shares.”

Sills maintained a “neutral” rating on the shares.

During the earnings call, CoreWeave management unveiled Q3 adjusted operating income guidance of between $160 million and $190 million, the midpoint of which was below analysts’ consensus estimate. Q3 sales guidance for $1.26 billion to $1.3 billion was marginally ahead of what the sell side had penciled in.

Others on the Street, however, raised their price target in the wake of this report, but to levels well below Bank of America’s forecast. Deutsche Bank hiked its price target to $125 from $50, while Melius Research upped its price target to $128 from $110.

Sills still has the third-highest price target among analysts surveyed by Bloomberg following this cut, and remains fairly optimistic on the firm’s prospects.

“While the magnitudes of the Q2 topline beat and Q3 raise were slightly below the Q1 print, results were solid, validating that Coreweave remains well positioned as a leading AI infrastructure vendor,” he wrote. “We believe Coreweave remains well positioned to benefit from a ramping AI infrastructure industry.”