- CRWV
- HSBC
The hot takes on what AI buildout CoreWeave’s (CRWV) financial future holds continue to pour in from Wall Street.
Some on the Street have defended CoreWeave and its debt-using business model. Others have used the stock’s rout to move to the sidelines. And then we have HSBC, which thinks the business is poised to shock the markets with its ugliness over the next few years.
In a new note, HSBC analyst Abhishek Shukla slapped CoreWeave’s stock with a $39 price target, about 34% below current trading levels.
“Our 2028-30 non-GAAP EPS estimates are 50-70% below consensus. We expect CoreWeave to earn a long-term non-GAAP operating margin of 15-16% vs management guidance of c25%,” Shukla said.
The reason for the earnings bearishness stems from rising angst over how CoreWeave funds its business, not worries of an AI slowdown.
“We note that yields on CoreWeave’s bonds are now in the 14-15% range, suggesting market concerns over credit worthiness. This may hamper the company‘s ability to finance speculative capacity or capacity that is backed by only short-term contracts. This removes one key upside for the stock, in our opinion. We also note that consensus is assuming a significant reduction in the interest rate that CoreWeave will need to pay on its debt, which seems increasingly unlikely to us,” adds Shukla.
Shukla expects CoreWeave’s loss per share in 2027 to be 13.3% higher than analyst estimates. For 2028, 2029 and 2030 he sees CoreWeave’s EPS to be 53.7%, 70.6% and 64.3% below consensus estimates, respectively.
CoreWeave’s stock has been torched in October to the tune of 29%.
The company’s corporate bonds across maturities continued to be dumped amid fears of an AI slowdown and its implications for the company’s precarious balance sheet. That has triggered a subsequent sharp sell-off in the stock.
The rise in yields on CoreWeave’s bonds even spurredElon Musk to post “Yikes” on X in response to a post by venture capitalist Chamath Palihapitiya last week.
Meanwhile, in a new report, Gartner forecast that by 2030, “cost pressure and a lack of a differentiating business model will force over 80% of neocloud providers to cease independent operations.”
CoreWeave is a neocloud. The report was essentially akin to yelling “fire” in a crowded theater.
The company does have its defenders, however.
“This [move in CRWV] is more sentiment driven. This is not about fundamentals. This is not about them not being able to pay for the debt, et cetera. This is more sentiment driven and the sentiment needs to change. And what’s going to happen is, as always, there’s going to be a period of concern. And then the fundamentals will kick in, meaning revenues, revenue growth,” BofA analyst Tal Liani told me on Sozzi Unleashed, saying he stands by his aggressive $140 price target on the stock.
