Selloff in CoreWeave stock is a buying opportunity: DB

Investing.com -- Deutsche Bank believes the sharp selloff in CoreWeave shares and debt over the past week has created a buying opportunity in the stock, with the firm keeping a Buy rating and $150 price target on the stock, implying 93% upside.

Analyst Brad Zelnick said a confluence of factors appears to have driven the decline. He acknowledged that the company’s future is tied to the success of AI and demand for the computing infrastructure behind it, so the shares should reflect shifts in sentiment there.

Even so, he argued the underlying contracts are solid.

“The vast majority of CoreWeave’s backlog is associated with long-term take or pay contracts where contracted revenue fully covers all capital and operating costs associated with the contract and generates a return for the company,” Zelnick wrote.

The analyst estimates 60% to 65% of the backlog was tied to investment-grade customers exiting the second quarter. CoreWeave has used those contracts to raise project-specific debt at a cost of capital at or below the parent company rate.

“A strong customer base, established record of execution, backlog conversion and leading infrastructure performance is all supportive of their issuer profile relative to neocloud peers, in our view,” stated Zelnick.

“Available liquidity stood at $15.5bn, and since that time the company: closed a $2.6bn DDTL 5.5 (backed by shorter 3-yr contracts) at SOFR + 5.50%; closed a $4.2bn 2.875% Convertible Senior Note and announced a 35m share ATM equity program,”

Deutsche Bank forecasts about $10 billion of operating cash flow over the next 12 months, against required capital expenditure of roughly $45 billion. Zelnick said more capital will be needed, but that it can be raised at a steady pace backed by the customer backlog.

Original Article

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