CoreWeave has pulled back due to concerns over its massive debt load, and investors should take advantage of the discount, according to UBS. The investment bank initiated coverage of CoreWeave with a buy rating. It put a $120 price target on shares, suggesting 38% upside from Tuesday’s close. “Despite outstanding AI compute demand signals and strong evidence that CoreWeave’s revenue per GW metric will march higher, Street sentiment is very cautious,” analyst Karl Keirstead said in a note to clients. “We respect the concerns (primarily leverage/credit risk) but conclude that they’re peaking.” Shares have plunged nearly 18% over the past three months as investors weigh the risks of CoreWeave taking out massive amounts of debt to fuel growth. Its sell-off deepened after CoreWeave said last week that it would sell $3 billion worth of convertible debt and issue millions of new shares, fueling equity dilution concerns. CRWV 3M mountain Shares are down about 18% over the past three months. However, CoreWeave is likely to bounce back as it notches growth linked to continued AI compute demand, per UBS. “The easier call, in light of persistent leverage concerns, would be to launch with a more neutral/cautious stance and wait,” Keirstead wrote. “Yet in our view the Street may be under-appreciating the strength and durability of AI compute demand (from enterprises, not just the frontier labs), [graphics processing unit] pricing trends (driving a ramp in revenue per GW from ~$11 billion today to $15+ billion over time), and the fact that… CoreWeave has established a reputation for reliability and performance that distinguishes it from peers.” UBS’ call falls in line with consensus on the Street. Of the 41 analysts covering CoreWeave, 28 have a buy or strong buy rating on the stock, LSEG data shows.
