CoreWeave Stock (CRWV) Making Gains: Citi Resume with ‘Buy’ Rating, as Price Target Cut

CoreWeave's stock (NASDAQ: CRWV) has bounced off the recent drop, with a 5.10% gain in pre-market trading today adding to a 4.85% increase during Thursday's session. After having fallen 28.8% from the week following December 9th, support has stepped in around the $65 level for CRWV. 

This morning's move has been supported somewhat by Citi resuming coverage of the stock with a ‘Buy' rating. Despite the bullish call, Citi tempered its outlook slightly by lowering the price target to $135 from a previous $192.

The stock's initial upward movement reflects markets' positive reaction to Citi's renewed endorsement, even with the reduced price target. The move acknowledges both CoreWeave's strong growth potential and the headwinds it is seen to be facing, with the firm pointing to robust demand for CoreWeave's services, anticipating the company's capacity will align with this demand throughout the fourth quarter.

CoreWeave's Q3 earnings report revealed revenues of $1.36 billion, exceeding analyst expectations of $1.29 billion. The company also demonstrated improved profitability, narrowing its net loss to $110 million from $360 million in the same quarter of the previous year. However, the stock experienced a 6% dip in after-hours trading following a downward revision in full-year revenue guidance, primarily due to delays from a third-party data center developer.

Adding another layer of complexity, Q3 saw substantial insider selling, with CoreWeave insiders divesting over $1 billion worth of stock following the expiration of a lockup period. Director Jack Cogen sold shares worth $477 million, while co-founder Brannin McBee sold $426 million, raising questions about internal confidence in the company's future performance.

Concerns regarding rising debt levels within the AI sector, particularly for companies like CoreWeave that are heavily investing in infrastructure through borrowing, have also surfaced. This interconnected borrowing creates potential systemic financial risks if companies struggle to achieve near-term profitability.

The recent price action in CoreWeave stock encapsulates a narrative of high-growth potential intertwined with operational challenges and financial risks. Citi's resumed ‘Buy' rating provides a short-term boost, the overall market sentiment will be closely watching how the company navigates supply chain constraints, manages its debt, and addresses concerns, all of which will likely influence what happens from here.