On Tuesday, Compass Point increased its price target for Core Scientific Inc. (NASDAQ: CORZ) shares to $12.50, up from the previous target of $8.50, while maintaining a Buy rating on the stock.
The adjustment follows the recent announcement of a 200MW AI/HPC hosting agreement with Coreweave, which is anticipated to generate more than $3.5 billion in revenue over the duration of the contract.
The firm's analyst expects the contract to contribute $1.46 million per megawatt in annual revenue. The rollout is projected to start with 25MW in the first quarter of 2025 and to reach full capacity of 200MW in the second half of the same year. The revenue model also includes a conservative gross margin of 75% and an additional $10 million in operating expenses.
The new price target is derived from a sum of the parts analysis, considering both BTC Mining/Hosting and HPC operations. It factors in the hosting deal's estimated impact on the company's financials, including a 20% discount applied to the CY26 HPC estimates for approximately 300MW of capacity, anticipated to be operational by CY25, and a 12.5x multiple. The analysis also subtracts $1.5 million per megawatt in capital expenditures, which may be a conservative estimate.
Furthermore, the analyst suggests that Core Scientific's stock is undergoing a re-rating process and sees further potential for an increase in value with additional HPC announcements.
The firm also notes that Core Scientific could be a potential acquisition target, evidenced by Coreweave's previous offer of $5.75 per share, which was declined on the grounds of undervaluing the company. The full potential of a 500MW capacity could see the price target rise to $17.50, indicating optimism for the company's growth prospects.
In other recent news, Core Scientific Inc. has been making significant strides in its operations. The company recently received an upgrade from a Neutral to a Buy rating by BTIG, owing to its consistent operational performance and potential to reduce its debt more aggressively.
This upgrade is based on the anticipation of a strengthening Bitcoin price and the company's ability to exercise its Tranche 1 and Tranche 2 warrants, which could net the company approximately $670 million and aid in retiring its debt.
In addition to this, Core Scientific announced a 72-megawatt capacity expansion at its Denton, Texas data center. This expansion is part of a broader strategy to complete 372 megawatts of partially built infrastructure across the company's Texas facilities.
The completion of this project, expected by the end of the second quarter of 2024, will increase the operational infrastructure at the Denton data center to 197 megawatts and the total Company-owned infrastructure to 817 megawatts.
Furthermore, Core Scientific reported a record-setting March 2024 in bitcoin earnings, with the company mining 906 bitcoin and facilitating the earning of an estimated 309 bitcoin for its customers at its data centers. This achievement was boosted by the deployment of approximately 2,500 S21 miners, which increased the company's total operational hash rate to 25.6 exahash.
The company also managed to sell 981 bitcoin in March, with sales proceeds amounting to approximately $66.3 million, contributing to a first-quarter total of approximately $160.8 million in bitcoin sales proceeds. These are the latest developments in Core Scientific's operations.
InvestingPro Insights
As Core Scientific Inc. (NASDAQ: CORZ) garners attention with its significant hosting agreement and revised price targets, real-time data from InvestingPro underscores the dynamic nature of the stock. With a market capitalization of $1.46 billion and a striking one-month price total return of 125.55%, investors are witnessing a robust uptick in value. The company's revenue growth for the first quarter of 2023 soared by 48.6%, reflecting a promising trajectory in its financial performance.
InvestingPro Tips highlight the stock's current status in overbought territory, as indicated by the RSI, and the fact that analysts are optimistic about the company's earnings, with two analysts having revised their earnings upwards for the upcoming period. This positive sentiment is further bolstered by a strong return over the last week. For those seeking a deeper dive into the potential of Core Scientific, additional InvestingPro Tips are available, with a total of 14 tips that can be accessed for a comprehensive analysis. Investors interested in these insights can utilize the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching their investment strategy with expert knowledge.
While the company does not pay dividends, the focus on growth and expansion, as evidenced by the new hosting agreement, could position Core Scientific as a compelling choice for growth-oriented investors. With the company's next earnings date on the horizon, August 28, 2024, the market will be keenly watching for the financial outcomes of these strategic moves.
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