Core Scientific upgraded from neutral to buy by B Riley in response to its high-performance computing expansion

B Riley Raises Core Scientific to Buy from Neutral

Core Scientific (CORZ) has been upgraded to a "buy" rating by B Riley, with the broker also lifting its price target on the shares to $13 from $0.50. This upgrade comes as the company continues to make significant strides in the high-performance computing (HPC) hosting space.

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A Future Leader in HPC Hosting

According to a research report published by B Riley on Tuesday, Core Scientific is well-positioned to become a future leader in HPC hosting due to its lucrative deals with CoreWeave and management’s solid experience in operating enterprise data centers. The broker highlighted the company’s ability to achieve economies of scope through its partnership with CoreWeave.

Economies of Scope: A Key Driver for Digital Miners

The report notes that digital miners are increasingly moving towards achieving economies of scope, which involves leveraging common resources and infrastructure to reduce costs and increase efficiency. B Riley analysts Lucas Pipes and Nick Giles wrote:

"With 1.23 million bitcoin (BTC) left to be mined (~6% of total issuance), the size of the industry, excluding transaction fees, is around $80 billion at today’s BTC prices."

The brokers believe that economies of scope will become increasingly important for digital miners as they strive to reduce costs and increase efficiency.

Core Scientific Exceeds Expectations

B Riley noted that Core Scientific has exceeded expectations with its deal structure agreed upon with CoreWeave. The company has managed to secure funding for all capital costs arising from HPC upgrades, which will be covered by CoreWeave. This agreement is seen as a significant step towards achieving economies of scope.

Potential Revenue Streams

The report highlights the potential revenue streams generated by Core Scientific’s partnership with CoreWeave. The broker valued the already announced agreements at $2.3 billion in total for the committed 270 megawatts (MW). This figure does not include possible extension options for both contracts.

Upgrade to Buy and Price Target Increase

As a result of its research, B Riley has upgraded Core Scientific’s rating to "buy" from "neutral." The broker has also increased its price target on the shares to $13 from $0.50. The shares were trading 1.5% lower at $11.53 at publication time.

Conclusion

Core Scientific is well-positioned to become a future leader in HPC hosting due to its partnership with CoreWeave and management’s experience in operating enterprise data centers. The company has exceeded expectations with its deal structure, securing funding for all capital costs arising from HPC upgrades. With the potential for significant revenue streams generated by its partnership with CoreWeave, Core Scientific is an attractive investment opportunity.

Full Disclosure

The information contained in this report is based on B Riley’s analysis and estimates. It should not be considered as investment advice. Investors are advised to conduct their own research and due diligence before making any investment decisions.