CoreWeave Just Scored a Leidos Partnership. What That Means for CRWV Stock Here.

Neocloud provider CoreWeave (CRWV) saw its stock rise by 21.5% intraday on July 30 as the company announced a partnership with Leidos Holdings (LDOS) to provide artificial intelligence (AI) cloud services to United Stated federal agencies, so that they can deploy and operate AI at mission scale. This extends CoreWeave’s reach into addressing U.S. Intelligence Community (IC) and Department of Defense's (DoD) unique requirements. 

This also diversifies CoreWeave’s customer base, as government contracts bring stability and are spread across a broad number of agencies, which is important for a company that relies on its top customers for a major portion of its revenue. 

Moreover, there’s a threat looming of a customer turning into a potential rival. Meta Platforms (META) is reportedly entering the neocloud business, with its massive cash hoard and industry-wide reach. In Q1, CoreWeave executed multiple new agreements with Meta, including a new $21 billion commitment signed in March. 

On the other hand, the neocloud business is thriving, with providers expected to capture 20% of the $267 billion AI cloud market by 2030, as per Gartner. Therefore, established neocloud providers like CoreWeave have significant prospects in the market, and the Leidos partnership is a possible testament to that. 

About CoreWeave Stock

CoreWeave is a cloud infrastructure company focused on providing GPU-powered computing for AI developers and enterprises. It operates data centers across the U.S. and Europe, with a platform designed to support large-scale training and deployment of generative AI workloads. 

The company has built its business around specialized cloud services, automation software, and high-performance infrastructure that helps customers run compute-intensive applications efficiently. CoreWeave is headquartered in Livingston, New Jersey and has a market capitalization of $33.1 billion.

CoreWeave is facing an interesting situation at the moment. The company faces strong demand from the AI boom, but investors have been concerned about its heavy spending and lack of profitability. As a result, the stock has also faced criticism from investors, with declines over the past year. 

Over the past 52 weeks, CoreWeave’s stock has dropped 30.25%, while it has gained modestly by 0.22% year-to-date (YTD). Over the past month, the stock declined by 27.9%. The company’s shares reached a 52-week low of $60.55 on July 29, but are up 18.5% from that level. 

On a forward-adjusted basis, CoreWeave’s stock is trading at a 3.19 times price-to-sales ratio, which is a bit lower than the industry average of 3.26 times. 

CoreWeave’s Q1 Revenue Surged on AI Demand, but Margins Remained Pressured

Solid AI demand propelled CoreWeave’s first-quarter revenue by 111.6% year-over-year (YOY) to $2.08 billion. Seeing such a surge, the company also reported that it remains on track to surpass 8GW of active power by 2030. However, the company’s losses have widened. Its adjusted net loss margin climbed from 15% to 28% YOY. CoreWeave is incurring heavy capex to keep up with demand. In Q1, it reported $6.80 billion in capex, which is a huge jump from the $1.90 billion it had incurred just a year prior. At the end of Q1, CoreWeave had a $99.40 billion revenue backlog. 

Wall Street analysts have a tepid view about CoreWeave’s bottom-line trajectory. For the second quarter (to be reported on Aug. 11, after the market closes), its loss per share is expected to deepen to $1.31. For the current fiscal year, loss per share is expected to increase by 69.9% to $4.57. On the other hand, for the next fiscal year, the company’s loss per share is projected to decrease by 29.3% annually to $3.23. 

What Analysts Think About CoreWeave’s Stock

Recently, analysts at Truist upgraded CoreWeave from “Hold” to “Buy,” but reduced the price target from $131 to $126. Analysts at the firm believe that the demand for compute will keep increasing as enterprises move toward open models and sovereign AI. Truist considers this a tailwind for CoreWeave as the company trades at a discount to other neoclouds, although it has a “leadership position.” The analyst sees Meta’s entry as a threat but also believes that it will keep its existing contracts. 

Baird initiated coverage of CoreWeave with an “Outperform” rating and a $100 price target. Analysts at the firm believe the company is positioned to benefit from investment in AI infrastructure, as it maintains expanding computing capacity and a close relationship with Nvidia. The brokerage said AI infrastructure supply shortages could benefit operators with a proven track record of execution.

Wall Street is taking notice of CoreWeave’s stock, with analysts awarding it a consensus “Moderate Buy” rating overall. Of the 35 analysts rating the stock, a majority of 20 analysts have given it a “Strong Buy” rating, while 14 analysts are taking the middle-of-the-road approach with a “Hold” rating, and one analyst gave a harsh “Strong Sell” rating. The consensus price target of $136.15 represents an 89.7% upside from current levels, while the Street-high price target of $250 indicates a 248.3% upside.