On Wednesday, Core Scientific Inc. (NASDAQ:CORZ) received an upgrade from a Neutral to a Buy rating by BTIG, with a new price target set at $8.00. This change in stance is attributed to the company's consistent operational execution and the anticipation of a strengthening Bitcoin (BTC) price, which is expected to enable the company to reduce its debt more aggressively.
The firm highlighted that Core Scientific, which currently holds approximately $589 million in debt post a recent repayment of around $19 million after the first quarter of 2024, is positioned to benefit as it exercises its warrants. The exercising of the Tranche 1 warrants, which are roughly 98 million shares with a strike price of $6.81 and mature in the first quarter of 2027, could net the company approximately $670 million.
The Tranche 2 penny warrants, amounting to about 82 million shares, are set to mature in the first quarter of 2029 and allow for a cashless exercise. The analyst pointed out that the exercise of these Tranche 1 warrants presents a clear opportunity for Core Scientific to retire its debt and potentially lead to an upward re-rating of its stock value.
The report further states that a higher stock price would facilitate the exercise of the warrants at the $6.81 strike price, thus enabling the company to deleverage and remove restrictive covenants currently in place. These include a 50% cash sweep and the obligation for the company to sell all its mined BTC.
InvestingPro Insights
With Core Scientific Inc. (NASDAQ:CORZ) receiving a positive outlook from BTIG, it is important to consider the latest InvestingPro data and tips for a comprehensive analysis. According to InvestingPro, two analysts have revised their earnings upwards for the upcoming period, indicating a growing confidence in the company's financial prospects. Additionally, the stock has experienced a significant return over the last week, month, and three months, with a one-week price total return of 19.52%, a one-month return of 56.47%, and a three-month return of 31.91%.
InvestingPro data also reveals that Core Scientific has a market capitalization of $881.81 million and a forward P/E ratio of 37.78. This ratio suggests that investors are anticipating higher earnings in the future. The company's revenue for the last twelve months as of Q1 2024 stands at $561.04 million, with a quarterly revenue growth of 48.6%, highlighting robust short-term expansion.
InvestingPro Tips also suggest that analysts predict the company will be profitable this year, which aligns with BTIG's bullish stance. However, it is worth noting that the Relative Strength Index (RSI) suggests the stock is currently in overbought territory, which may signal a potential pullback or consolidation in the near term. Core Scientific does not pay a dividend, which is typical for companies focused on reinvesting earnings into growth opportunities.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/CORZ. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of insights that could further inform your investment decisions.
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