CoreWeave (NASDAQ:CRWV), an Nvidia (NASDAQ:NVDA)-backed company, remains in a bear market after falling 52% from its all-time high. The stock ended the week at $90.60, well above its July low, as investor focus now shifts to the company’s second-quarter earnings report.
CoreWeave Stock in Focus Ahead of its Earnings
CoreWeave, the biggest neocloud company, will be in the spotlight next week as it publishes its financial results. These results will provide more color about its revenue growth, backlog, and capital expenditure plans.
The most recent earnings showed that its revenue jumped to over $2.07 billion in the first quarter from $982 million in the same period last year. Its net loss widened to $740 million from $315 million, with its depreciation and armotization hitting $1.1 billion. Revenue backlog jumped to $99 billion.
Analysts expect the upcoming earnings report to show that its revenue surged in Q2. Precisely, the average estimate among analysts is that its revenue jumped by 110% in the second quarter to $2.56 billion. This growth is because the company has inked major deals with the biggest AI companies like Microsoft (NASDAQ:MSFT), OpenAI, Meta Platforms (NASDAQ:META), and Anthropic.
CoreWeave Faces Major Risks
CoreWeave faces some major risks that may affect its stock’s performance after earnings. One of them is the rising capital expenditures as the cost of memory, servers, and GPUs continue rising. Its guidance is that it will spend between $30 billion and $35 billion in Capex this year.
Another challenge is that the neocloud industry is that competition continues rising. For example, Meta has hinted that it will start selling extra computing power to other companies. SpaceX (NASDAQ:SPCX) has already acquired key customers like Anthropic, Google, and Reflection AI. Most Bitcoin (CRYPTO: BTC) mining companies like Riot Platforms, IREN, and MARA Holdings have all expanded to the industry.
Most importantly, CoreWeave’s debt continues to grow. It ended the quarter with over $25 billion in total debt, a figure that will continue growing.
These risks explain why the company’s short interest has remained elevated despite its strong growth. Benzinga data shows that it has a short interest of 15%, meaning that many investors expect the stock will retreat this year.
Analysts have a mixed opinion about CoreWeave. Citigroup’s Tyler Radke slashed his target from $158 to $142, while Jefferies and Raymond James downgraded their ratings from buy to hold.
The options market is pricing in strong volatility after its earnings this week. It has an implied volatility of 118%, higher than its historical average of 115%.
Technically, CoreWeave stock has rebounded after bottoming at $60 in July this year. It has already rebounded above the key resistance level of $66.25, its lowest level in November and December last year and March this year.
The stock has jumped above the 25-day Exponential Moving Average (EMA) and the Strong, Pivot, and Reverse level. Therefore, the stock will likely jump and retest the resistance at $100. A retreat, on the other hand, may push it to the key support of $66.
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