On Monday, Bank of America analyst Bradley Sills downgraded CoreWeave (CRWV) stock to Hold from Buy on valuation concerns. The 4-star analyst noted that the stock has rallied 145% since its first-quarter earnings and is trading at a premium valuation of 2027 EV/EBIT (enterprise value-to-earnings before interest and taxes) of 25x. CoreWeave, a cloud provider that specializes in AI (artificial intelligence) infrastructure, is seeing strong traction for its offerings amid the ongoing AI boom.
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The company is reportedly powering the recently announced cloud deal between Alphabet’s Google (GOOGL) and ChatGPT-maker OpenAI.
Bank of America Downgrades CRWV Stock, but Boosts Price Target
Bank of America’s Sills downgraded CoreWeave’s rating as he believes that much of the near-term upside has been priced into the stock. Interestingly, he boosted CRWV’s price target to $185 from $76, pointing out several positives. Sills noted certain favorable developments, including a new hyperscaler customer, expansion of the OpenAI agreement, impressive top-line momentum, and a lower cost of capital for the recently raised debt.
Sills also mentioned robust new contracts, reinforcing demand for CoreWeave’s AI infrastructure. For context, CoreWeave signed a $4 billion expansion deal with OpenAI, only two months after the initial agreement was announced in March. Further, he pointed out that the average contract duration has increased to 4.5 years from four years since 2024.
Despite these positives, Sills is cautious as he believes that the AI spending growth rate is peaking, though still very healthy. Notably, spending on AI infrastructure is estimated to touch $206 billion in 2027, reflecting a 4% year-over-year growth. However, this marks a deceleration from the 65% jump seen in 2025. That said, Sills added that estimates could move higher on a larger base. Specifically, OpenAI’s ChatGPT is the single largest consumer of AI workloads and is growing at a rapid pace. Consequently, Sills expects CoreWeave’s AI infrastructure market to witness continued growth.
However, the analyst expects $21 billion of negative free cash flow through 2027, due to elevated capital expenditure ($46.1 billion through 2027). While CoreWeave recently raised debt at a lower cost of capital, this represents only a small proportion of the overall incremental debt needed to support growth. Consequently, Sills is concerned about the cost of debt, given that historically the company has funded 85% of its capex with debt.
Is CoreWeave Stock a Good Buy?
Prior to the Bank of America rating downgrade, Wall Street assigned CoreWeave stock a Moderate Buy consensus rating based on seven Buys and five Holds. The average CRWV stock price target of $47.42 indicates a downside risk of about 68% from current levels.
