HSBC has downgraded CoreWeave to a 'reduce' rating, setting a price target of $39, which suggests a potential 36% drop from its recent closing price. Analyst Abhishek Shukla highlighted that CoreWeave's projected return on invested capital of 8.9% for 2026-2030 is below its borrowing costs, indicating that further investments could lead to value destruction.
The company's stock has already fallen over 25% last week amid investor concerns regarding its substantial debt, which exceeds $51 billion, primarily for infrastructure related to AI. Additionally, the spreads on CoreWeave's credit default swaps have reached distress levels, signaling heightened risk of default.
Despite HSBC's bearish stance, the majority of analysts covering CoreWeave remain optimistic, with 32 out of 45 maintaining a buy or strong buy rating, indicating a divergence of opinion in the market regarding the company's future prospects