CoreWeave stock downgraded by BofA on valuation after 145% rally

CoreWeave (NASDAQ:CRWV) was downgraded by BofA Securities on Monday from Buy to Neutral, though the firm more than doubled its price target to $185 from $76. According to InvestingPro data, the stock currently trades at an EV/EBITDA multiple of 54.7x, suggesting a premium valuation relative to peers.

The cloud computing company’s shares have surged 145% following its first-quarter results, prompting BofA to reassess its rating despite acknowledging several positive developments for the company. The stock has delivered an impressive 268% return over the past six months, though it has recently experienced a 9.2% decline over the past week.

BofA cited three key positive factors in its analysis: CoreWeave’s addition of a new hyperscaler customer, expansion of its agreement with OpenAI, and a debt raise at a lower cost of capital.

Despite these favorable developments, BofA believes "much of the near-term upside has been priced in" with CoreWeave now trading at 25 times estimated calendar year 2027 EBIT, representing a premium to the peer group average of 16 times.

The new price target of $185 reflects a multiple of 29 times estimated calendar year 2027 EBIT, compared to the previous multiple of 16 times, or 0.4 times when adjusted for CoreWeave’s 69% growth rate, versus the peer group at 16 times or 0.9 times adjusted for 18% growth.

In other recent news, Applied Digital Corp. has been in the spotlight following CoreWeave Inc.’s decision to sell its entire stake in the company. Despite this development, Applied Digital continues to receive strong analyst support, with eight buy ratings and one hold rating, and no sell ratings reported. Compass Point recently downgraded Applied Blockchain Inc. from Buy to Neutral, setting a price target of $13.00. This decision came after Applied Blockchain secured a significant deal with CoreWeave, expected to generate approximately $7 billion in revenue over a 15-year lease agreement. However, Compass Point expressed concerns about potential risks related to project financing and equity involvement.

CoreWeave has also been active in the news, with its stock experiencing a dramatic increase since its IPO. Citizens JMP reiterated a Market Perform rating on CoreWeave, citing valuation concerns despite the stock’s growth. Meanwhile, DA Davidson maintained an Underperform rating on CoreWeave, highlighting skepticism about the company’s financing structure and projected shareholder returns. Analyst Gil Luria from DA Davidson pointed out potential issues with CoreWeave’s financing and asset valuation, suggesting that previous deals might be unprofitable. These recent developments provide investors with critical insights into the evolving landscape surrounding these companies.

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