Defying Wall Street: Why Bernstein Expects CoreWeave's Stock to Continue Plummeting

Bernstein analyst Madison Rezaei, one of the few "bears" on Wall Street regarding cloud infrastructure provider CoreWeave, reaffirmed her sell rating on the company’s stock and lowered her price target from $74 to $51, according to Yahoo Finance. The new target implies an 8% decline in the stock price—following a 10% plunge at the close of trading on October 22.

“Seven months ago, when we began our coverage of CoreWeave with a price target of $56, we were met with a barrage of criticism,” the analyst wrote. “Today, it’s much harder to find optimists. Of course, some of them have simply stopped calling us, but it seems that the problems with this business model are now being recognized much more widely.”

Rezai noted that the situation could change, as this is an extremely volatile stock whose performance is largely driven by market momentum. However, she warned that without significant changes, the fundamental indicators are likely to remain at their current levels.

That said, the analyst does not believe that CoreWeave’s stock will lose all its value. The company still has a large order backlog, and while the terms of its contracts may not seem particularly attractive, they are not unprofitable. Rezai also believes that Nvidia may step in if CoreWeave faces serious financial difficulties. This could limit the decline in the stock price, though it would not necessarily bring it back to growth.

In August, following CoreWeave’s positive quarterly report —which showed a 112% increase in revenue and an order backlog of more than $100 billion— Bernstein raised its price target to $74, though it maintained its sell rating at the time, arguing that the strong results were “not enough to believe in the dream” of neo-clouds.

Since then, the company has found itself at the center of a sell-off in the AI sector. Over the past month, CoreWeave’s stock has lost 36% of its value, while the value of its debt securities—which it had been actively issuing to finance the expansion of its computing capacity—has risen sharply. As a result, the market now estimates the probability of the cloud startup defaulting at more than 60%.

The slump continued, even despite Elon Musk’s optimistic comments during the conference call following SpaceX’s quarterly earnings report. He called talk of an excess of computing power for AI “ridiculous” and stated that investments in this area could pay for themselves in as little as six months next year. These remarks temporarily halted the decline in the stock prices of CoreWeave and other “non-cloud” providers.

Wall Street’s average price target for CoreWeave shares is $136.8, which implies upside potential of 146% relative to the closing price on October 22. Only three out of 47 analysts recommend selling the company’s stock. CoreWeave has 33 buy recommendations.

This article was AI-translated and verified by a human editor