Core Scientific Moves to Neutral as CoreWeave Deal Adds Complexity: H.C. Wainwright
Brokerage firm HC Wainwright has cut shares of bitcoin mining company Core Scientific (CORZ) to “neutral” from “buy,” citing increased risk exposure following the recent announcement of a deal with AI cloud services provider CoreWeave (CRWV).
The broker also removed its price target for the stock, noting that Core Scientific's performance is now more closely tied to CoreWeave's performance.
At press time, Core Scientific shares were up 1.3%, trading at around $15. Shares fell 18% yesterday following news of the deal. CoreWeave shares were down 2.6%.
Artificial intelligence infrastructure company CoreWeave said Monday it has reached an agreement to buy Core Scientific, valuing the bitcoin miner's shares at approximately $20.40 per share based on recent closing prices.
While the brokerage continues to view its own sales estimates for Core Scientific as conservative, especially given that they do not factor in the company's planned HPC (high-performance computing) capacity additions for next year, it highlighted several unresolved factors, including unfinished infrastructure purchases.
However, the company's analysts are expecting shareholder approval of the deal, and there are no signs of delays in the timing of its completion.
Mr. Wainwright described Core Scientific as a company with “high levels of risk in its internal cryptocurrency business,” citing fluctuations in network hashrate and changes in the cryptocurrency market.
The report notes that while Core's diversified operations help mitigate some of that risk compared to smaller peers, the company now also faces CoreWeave risks related to AI development, customer base concentration and leverage.
Additional hurdles include potential dilution, lack of mining equipment, increased regulatory scrutiny and operational difficulties.
On a more optimistic note, the expected contribution of HPC revenue in future quarters could help reduce the company's sensitivity to Bitcoin price cycles and stabilize its results, the report said.
Read more: CoreWeave's all-stock offer to buy Core Scientific likely to attract attention from shareholders: KBW
Source: cryptonews.net
