CoreWeave IPO Was 'Fantastic Entry Point,' But Stock Now 'A Little Overheated'

Another analyst is staying on the sidelines of CoreWeave Inc (NASDAQ:CRWV) after the rally in shares since the March IPO.

The CoreWeave Analyst: H.C. Wainwright analyst Kevin Dede initiates coverage on CoreWeave with a Neutral rating with no price target.

Read Also: CoreWeave’s 290% Rally Raises Valuation Fears, Analyst Says ‘Upside Has Been Priced In’

The Analyst Takeaways: CoreWeave is taking the AI sector by storm with both speed and excellence, Dede said in a new investor note.

"A tangled web, carefully woven, delivers compute efficiency and speed to market," Dede said.

The analyst said the company is helping to improve and support high-performance compute for AI applications.

Dede said part of the bullish sentiment for CoreWeave stock and its surging price comes from its proven model and its customer list. More bullish sentiment for the stock could come from further growth in the AI sector.

Microsoft Corporation (NASDAQ:MSFT) is named in the report as a key customer, making up 64% of CoreWeave's revenue in the last fiscal year. Other customers include Meta Platforms, Google, and OpenAI. Dede also predicts that some three-letter government agencies could be unnamed CoreWeave customers.

Dede calls CoreWeave's customer list "both flashy and well-recognized," as it includes leading hyperscalers and large names in high-performance compute and AI.

"We see the company as an ultimate benefactor in the surge of artificial intelligence use."

While Dede is bullish on the outlook for the AI sector and CoreWeave's model, the sharp run-up in the share price has the analyst on the sidelines.

"Despite the positive arguments, we initiate coverage with a Neutral rating as the stock may need a minute to breathe after a five-fold breakout versus a period-comp 25% Nasdaq rise."

The analyst said the IPO priced at $40 offered a "fantastic entry point" and shares are now "perhaps a little overheated."

Another concern for the analyst is potential dilution with more capital needed to support growth.

"We are not here saying it is impossible, but caution against unknown, unforeseen headline risks."

CRWV Price Action: CoreWeave stock trades at $167.09 on Wednesday versus a 52-week trading range of $33.52 to $187.00. Shares opened at around $39 and closed at around $40 on their first day of trading before rallying days later.

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