Last Update04 Oct 25Fair value Increased 4.77%
Analysts have raised their price target for Core Scientific from $19.05 to $19.95 per share, citing updated deal terms and ongoing re-evaluation of merger economics following CoreWeave's acquisition agreement.
Analyst Commentary
Analysts continue to weigh the implications of Core Scientific's pending acquisition by CoreWeave, with a mix of optimism for the company's positioning and caution regarding valuation and deal structure. The following summarizes current perspectives shaping sentiment:
Bullish Takeaways- Bullish analysts emphasize that the acquisition is a strong endorsement of Core Scientific’s infrastructure capabilities and highlights powered land as a high-value asset for AI compute applications.
- Some see the deal as providing positive valuation signals for the broader sector. They suggest Core Scientific’s assets may be more valuable than previously recognized.
- The fixed exchange ratio in the all-stock transaction is considered attractive if CoreWeave’s share price remains strong, creating potential upside for existing shareholders.
- Analysts with a positive outlook maintain that the transaction validates Core Scientific's strategy and could enhance growth opportunities after the merger.
- Several analysts have lowered price targets or downgraded ratings due to concerns that the revised deal economics may limit immediate upside potential.
- There are ongoing worries about the possibility that CoreWeave’s share price could decline before the deal closes, which could reduce the ultimate value realized by Core Scientific shareholders.
- Some remain cautious about the near-term integration risks and overhangs as CoreWeave transitions into a vertical data center provider. This transition may complicate valuation dynamics.
- Certain analysts indicate a perception that the stock's risk/reward profile is less compelling following recent price movements and the changing industry landscape.
What's in the News
- CoreWeave's $9 billion acquisition of Core Scientific faces strong opposition from major shareholders. Some shareholders argue the deal's terms could short-change them and plan to vote against it unless changes are made (Financial Times).
- A hedge fund holding over 6% of Core Scientific shares has threatened a proxy battle against the planned acquisition unless the financial terms improve (Financial Times).
- New White House directives seek to expand 401(k) investments to include crypto and alternative assets, introducing new risk factors for retirement portfolios that include companies like Core Scientific (Reuters).
- President Trump is moving to open the U.S. retirement market to cryptocurrency investments through an executive order, which would directly impact publicly traded companies in the digital asset sector such as Core Scientific (Financial Times).
- The House has advanced a set of crypto regulation bills after historic delays, impacting a broad range of crypto companies, including Core Scientific (CNBC).
Valuation Changes
- Consensus Analyst Price Target has risen slightly, increasing from $19.05 to $19.95 per share.
- Discount Rate has decreased modestly from 9.21% to 9.10%.
- Revenue Growth projections remain flat at approximately 60.88%.
- Net Profit Margin is virtually unchanged, holding just above 23%.
- Future P/E ratio has increased moderately from 27.75x to 28.99x.
Key Takeaways
- Reallocating resources from Bitcoin mining to HPC infrastructure could drive future growth amid rising data center demands and diversified clientele.
- Debt restructuring and 0% interest funding improve growth potential and operational efficiencies through strategic hires, enhancing financial stability and earnings.
- Dependency on CoreWeave, shift in strategy, restructuring uncertainties, and execution delays pose risks to growth and profitability.
Catalysts
About Core Scientific- Provides digital asset mining services in the United States.
- Core Scientific secured a major HPC contract with CoreWeave, with a total revenue potential of $8.7 billion over a 12-year term, significantly boosting future revenue compared to their current levels.
- The company is expanding HPC infrastructure capacity by reallocating resources from Bitcoin mining, adding new sites, and extending existing ones, expecting to drive future revenue growth as data center needs rise.
- Core Scientific’s ability to diversify its customer base and reduce reliance on CoreWeave as a primary client could improve margins and provide more stable revenue streams in the long term.
- The improved balance sheet following significant debt restructuring and raising $625 million through a convertible note offering at 0% interest rates positions the company to effectively fund future growth initiatives with lower interest costs, improving net margins.
- Strategic hires of data center professionals enhance execution capabilities, likely leading to increased operational efficiencies, positively impacting earnings as the company grows its data center business.
Core Scientific Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Core Scientific's revenue will grow by 60.9% annually over the next 3 years.
- Analysts assume that profit margins will increase from -170.8% today to 23.0% in 3 years time.
- Analysts expect earnings to reach $334.4 million (and earnings per share of $0.83) by about September 2028, up from $-595.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $432.4 million in earnings, and the most bearish expecting $23 million.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.8x on those 2028 earnings, up from -7.0x today. This future PE is lower than the current PE for the US Software industry at 36.6x.
- Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 9.21%, as per the Simply Wall St company report.
Core Scientific Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The shift from Bitcoin mining to HPC hosting and the resulting decline in digital asset hosted mining revenue, which was down significantly from $30 million to $6.5 million, could adversely impact overall revenue if the new strategy doesn't ramp up as expected.
- The company faced a net loss of $265 million in the fourth quarter of 2024, an increase from the previous year's loss, raising concerns about its ability to reach profitability and improve net margins in the near term.
- The dependency on a singular client, CoreWeave, for a significant portion of projected revenue introduces concentration risk. If CoreWeave's demand or business model shifts unfavorably, it could dramatically decrease Core Scientific's forecasted earnings.
- With the recent Chapter 11 debt restructuring, there remains uncertainty about the company’s long-term financial health and its reliance on future capital expenditures, which could put strain on cash flow and negate earnings improvements.
- The delayed rollout of planned HPC capacity expansions due to permitting and equipment issues could slow revenue growth and heighten execution risk, potentially impacting future earnings.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $19.045 for Core Scientific based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $23.0, and the most bearish reporting a price target of just $15.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $334.4 million, and it would be trading on a PE ratio of 27.8x, assuming you use a discount rate of 9.2%.
- Given the current share price of $13.58, the analyst price target of $19.05 is 28.7% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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