CoreWeave Earnings Preview: IPO Lockup Period to End After Q2 Results
CoreWeave Earnings Preview: IPO Lockup Period to End After Q2 Results
CoreWeave’s Q2 report could be the ultimate AI sentiment test, with an 18% swing priced in and a lockup expiration just days away
- CoreWeave (CRWV) to report Q2 earnings on Tuesday, August 12.
- Earnings report to provide sentiment check for artificial intelligence sentiment.
- Options market shows an expected move of +/- 25.69 points, or 18% of Monday's closing price.
CoreWeave to report second quarter earnings on Tuesday, August 12
CoreWeave (CRWV) is set to report second quarter earnings on Tuesday, August 12, after the market close. Notably, the report will come after Tuesday’s closely-watched inflation report, which has the potential to shift broader market sentiment.
The stock was up over 20% since the start of August as of Monday, August 11. That compared to a 0.6% gain in the S&P 500 over the same period.
This will be CoreWeave’s second earnings report since the company listed on public markets back in March of this year. The stock has performed exceptionally well, rising over three times its initial public offering (IPO) price, making it one of the hottest IPOs in recent years.
CoreWeave provides cloud computing services that are optimized for artificial intelligence workloads and powers its infrastructure with graphic processing units (GPUs), mostly from Nvidia (NVDA). Nvidia is not only a strategic supplier for the company but also an investor. The broader market enthusiasm for artificial intelligence continues to support positive sentiment for its stock price.
However, the lockup period for investors ends on Thursday, August 14. These events can sometimes put downward pressure on the stock price, since insiders, who control large share amounts, may decide to sell some of their equity once the lockup period is over.
Given the hype in the AI space, the question of whether or not investors are willing to brush off poor results also needs to be asked. It's possible that investors continue to buy the stock even if earnings disappoint, especially since a dip in price could be viewed as a buying opportunity for bulls.
What do investors expect?
According to TradingView, investors expect CoreWeave to post earnings per share (EPS) of -$0.12 on $1.08 billion in revenue. Last quarter, the company reported a loss of $0.83 on EPS, which came in below estimates, but it managed to beat on revenue estimates at $982 million.
Analysts are mostly neutral on the stock, with 6 strong buy ratings, 16 hold ratings and 3 sell and strong sell ratings. One of the primary factors cited by analysts for the cautious ratings are that the company has a lot of debt and a stock price that has already risen quickly since its IPO. A beat against estimates would help to calm valuation fears.
Trading CoreWeave earnings
CoreWeave traded with an implied volatility rank (IVR) of 32.4, meaning that volatility is slightly below the average compared with trading since March when the company listed.
The options market expects a post-earnings move of +/- 25.69, or 18% of Monday’s 139.78 closing price. That is well above the average expected move of 5% to 10% for S&P 500 companies. CoreWeave’s high valuation and lack of public reporting history is likely driving the large move.
Technically, CoreWeave traded at its 50-day simple moving average (SMA) on Monday but an intraday attempt to clear the level failed. The recent gains come after prices pulled back in July following record highs from the month prior. Still, prices remain well above its IPO price.
While the June high at 187 is likely out of reach for a positive reaction, prices above the 50-day SMA would offer confirmation of the bullish trend for the month and put prices within striking distance of all-time highs. Alternatively, a pullback would have bulls defending the recent swing low from late July at 100.80.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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