CoreWeave, Inc. (NASDAQ:CRWV) is one of the Trending AI Stocks on Wall Street. On October 8, Evercore ISI analyst Amit Daryanani reiterated an Outperform rating on the stock with a $175.00 price target.
The firm is bullish on the stock, calling its profitability model strong based on its durable contracts, Nvidia’s backing, and long-term GPU demand.
“We think it is worth revisiting the topic of unit economics for CRWV, especially given investor concerns surrounding profitability/business model following yesterday’s Information article discussing the (low) profitability of ORCL’s GPU cloud business. Despite the capex intensity/debt financing required to deploy GPU clouds, we view CRWV’s model as durable, risk-managed, and profitable at scale even when taking high levels of depreciation expenses into account. Key considerations: 1) Multi-year Take-or-Pay/Noncancelable Contracts: CRWV sees an average 4-year duration for customer contracts (have been trending more toward 5 or more for more recent deals). 2) Built-to-Suit, Not On Spec: CRWV’s capacity is built not on spec and only developed once customer contracts are signed; the company typically receives prepayments equating to ~15–25% of TCV to fund initial capex requirements (GPUs, DC capacity). 98% of revenue is from reserved capacity. 3) NVDA MSA Provides Margin of Safety: In the event that CRWV does have unutilized capacity, NVDA is obligated to purchase the residual unsold capacity through April 2032.”
“4) Potential for Useful Lives > 6 Years: Management has pointed to several anecdotes/proof points that provide them with confidence they can continue to monetize GPUs well past their useful lives (Volta GPUs still in use, multi-year Hopper contracts continue to be signed, customers comfortable with signing 5–6 year Grace Blackwell contracts). Our analysis of a hypothetical ~$3.2B TCV 4-year GB200 contract resulting in ~$1B of capex, suggests that once deployed, CRWV should be able to return 40–50% incremental EBIT margins (potential for upside in EBIT margins beyond year-6 once hardware is fully depreciated) and ~70% incremental EBITDA margin. With the differences between incremental margins in our analysis and CRWV’s current mid-teens margin profile is more attributed to accelerated investments to support growth, revenue timing, and lower scale (currently). Net/net: We continue to hold a positive view on CRWV fundamentals. Maintain OP/$175 Target.”
CoreWeave, Inc. (NASDAQ: CRWV) is a cloud platform provider that provides equipment for AI and other computing purposes.
While we acknowledge the risk and potential of CRWV as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CRWV and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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