CoreWeave’s Bonds Hit 15% Yield: This Analyst Still Sees 105% Upside For The Stock

Bond investors are pricing CoreWeave Inc. (NASDAQ:CRWV) like a company under financial strain. Meanwhile, one of Wall Street’s biggest banks is pricing it like a stock that could more than double.CoreWeave shares fell about 16% on Wednesday as yields on its 2031 and 2032 bonds rose close to 15%, amid fears tech firms are borrowing too heavily for AI. The stock slid again by nearly 3% on Thursday. Over the last seven sessions, the stock has lost a third of its value and currently sits 65% below its May 2025 peak.Yet, on the same morning, Bank of America reiterated its Buy rating and $140 price target, about 105% above current levels.So who is reading CoreWeave correctly, the bond market or the analyst?CoreWeave’s Bonds Are Flashing A WarningThe yield on CoreWeave’s 9.625% bond due 2032 rose above 15.4% on Thursday, with the bond trading near 78 cents on the dollar, a level widely treated as the line where a borrower is considered financially strained. The yield on its 9.75% bond due 2031 stood above 15.3%. S&P Global rates CoreWeave B+, which is in junk territory. The timing made it worse. The selloff came on the same day a hotter U.S. inflation report pushed traders toward betting on a December Fed rate hike. Higher rates make it more expensive for heavily indebted companies to refinance. Read Also: CoreWeave Stock Keeps Sinking As Wall Street Questions Its Debt-Fueled AI Empire Bank Of America Raises Its Revenue ForecastsBank of America analyst Tal Liani said Wednesday’s drop “likely reflects concerns over financing hurdles for AI infrastructure players.”His team still raised its forecasts. It now expects revenue growth of 105% in 2027 and 63% in 2028, up from 102% and 58% previously.Two levers drive the upgrade.The first is capacity. CoreWeave had 1.5 gigawatts of active power at the end of the second quarter, and the bank expects 4.8 gigawatts by the end of 2028.The second is pricing. The bank sees annual revenue per watt rising from about $10 today to $14 by the end of 2028, as Nvidia Corp.‘s (NASDAQ:NVDA) next-generation Vera Rubin chips roll out.The $140 target values CoreWeave at 26 times the bank’s estimate of 2027 operating profit, measured as enterprise value to EBIT. Cloud data center peers trade at 14 to 19 times.How CoreWeave Pays For Its Build-OutCoreWeave mostly leases data centers instead of building them, and sells the capacity through five-year contracts with large cloud companies and AI labs. Customers often prepay about half the contract value.Because most of those customers have investment-grade credit ratings, lenders are willing to finance CoreWeave against the contracted cash flows, at a lower cost than its own credit would allow.The backlog stands at roughly $129 billion. Meta Platforms Inc. accounts for 27.1% and OpenAI for 17.4%.The Bull Case Comes With Big Cash NeedsBank of America’s own model also shows why bondholders are nervous.It forecasts negative free cash flow, meaning more cash going out than coming in after investment, of about $67 billion combined from 2026 to 2028. To fill that gap, it assumes about $59 billion of new borrowing.Interest expense nearly doubles over the period, from $3.08 billion in 2026 to $5.9 billion in 2028. Operating profit is not expected to cover interest payments fully until 2028, the same year the bank sees CoreWeave’s first full-year profit.Bank of America is betting that contracted revenue arrives on schedule and grows into the debt. The bond market is asking what happens if financing becomes more expensive first. Read Also: Dan Ives Calls CoreWeave Selloff ‘Way Overdone,’ Says Hyperscaler Earnings Will Back AI Spending — CRWV Stock Plunges Near 12-Month Low Photo: T. Schneider / Shutterstock