CoreWeave: why my sell-put gates say no
I went through my CoreWeave dossier this weekend, and the business and the balance sheet tell two different stories.
The business first. Revenue is up 115%, and the contracted backlog (remaining performance obligations) is $103.7B. Customers are signing long deals, so demand is not the problem.
The balance sheet is. Obligations are about $87B against roughly $5.0B of equity. Altman Z is 0.30, well under the 1.8 distress line. Interest coverage is −0.12×, so operating profit doesn't cover interest. Current ratio is 0.46. Two customers make up 63% of revenue, and capex runs at 271% of revenue. The model only works if those contracts keep getting funded. I'm not saying it fails, only that there's no margin for error.
My 11-pillar scorecard gives it 37/100 against a floor of 55.
Here is how it runs through my sell-put playbook, using Friday's close of $89.62:
Gate 1, event risk: FAIL. A securities class action is open.
Gate 2, trend: PASS. Spot is about 2.3% above the 200-day SMA.
Gate 3, volatility: AMBER. The IVR, IVP and IV÷HV stack is inverted.
Gate 7, earnings blackout: FAIL. Sources disagree on the date (5 Nov or 16 Nov), so I use the earlier one.
Gate 8, sizing: FAIL. Amber halves my Tier 2 cap to $5,000, and one contract doesn't fit.
On the Wheel, I only sell puts on names I'd be happy to own after assignment. With a beta of 7.41, a 10% market drop implies roughly −74%. I wouldn't want that stock.
So it's no trade. CRWV comes out of my Tier 2 rotation and stays on watch only.
Personal framework, not investment advice.
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- BerniceCarter·10-05Demand is not the clean part here — 63% revenue concentration means the backlog is only as good as two wallets. With interest coverage below zero, one funding pause can break the whole story1Report