CoreWeave (CRWV) Q1 FY12/26 Earnings Review (The Cestrian Circle Newsletter)
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Analysis by Alex King, CEO, Cestrian Capital Research, Inc.
During any great infrastructure build in the history of finance, there are two ways to make a lot of money.
1 - Recognize the build for what it is at the time it is happening, which is to say a capex-fueled frenzy in pursuit of what proponents say will be near-term positive cashflows. Trade the momentum and get out as momentum begins to fade. Don’t overthink it; let the crowd guide you.
And/or
2 - Wait for the overbuild and the excess capacity to hit home, see the sector collapse under its own weight, look for the capex to dry up but customers return, then invest in the infrastructure which now requires only maintenance capex therefore is producing prodigious free cashflows.
This has been true since the Romans started building straight roads. It was true in the railroad boom, true in the 1990s fiber and datacenter boom, and it’s true now of the AI boom.
You should not turn your nose up at the current market. It doesn’t have to be supported by fundamentals to make sense. Momentum is momentum and it will make you richer if you let it. You should also not believe it will go on forever this way. It can’t, it won’t, it will crater and then the opportunities on the long side will once again be wondrous.
Right at the heart of this is CoreWeave ($CRWV). I own this stock, it has been good to me so far and I expect it to generate more gains in the coming weeks. But I don’t plan to own it for anything other than momentum at present, because for now the business itself remains merely a conduit through which debt and equity capital is collected, turned into datacenter hardware, which is then rented out to end users. Cashflow is terrible and getting worse. I don’t know if CRWV turns cashflow positive before the market cycle turns, but either which way this thing can moon for some time and then it will hit the deck hard. After which time it may well be worth owning once more.
All you need to know to succeed with stocks like CRWV is: what market regime are you in, and what kind of business is it. Then you can act accordingly.
Let’s take a look at the numbers, the valuation, chart and price targets.