Investors should scoop up CoreWeave following an overblown sell-off last week, as it has key advantages over competitors, according to Goldman Sachs. The investment bank upgraded the neocloud stock to buy from neutral. It did trim pits price target on shares to $106 from $139, though that still implies nearly 73% upside from Friday’s close. “Not all neoclouds are created equal, and we view CoreWeave as being toward the top of the quality rankings in the ecosystem,” analyst Gabriela Borges said Monday in a note to clients. “We define quality as: a) the ability to execute, including deploying and scaling high performance [graphics processing unit] clusters at speed; and b) the potential to build durable moats by moving up the stack beyond pure GPU-[as a service] infrastructure.” Neocloud companies are cloud computing firms that specialize in infrastructure tailored to supporting artificial intelligence workloads.CoreWeave popped 6% in the premarket following the rating change. CRWV 5D mountain CRWV 5-day chart Shares of CoreWeave plunged 25% last week to worries in the credit market that the company had borrowed too much money for its artificial intelligence build-out. CoreWeave has takne out more $51 billion of debt to finance AI infrastructure. But Borges said that CoreWeave’s cost of capital will not rise significantly as many of its deals use asset-backed financing, which will have lower rates. “CoreWeave’s primary funding method for scaling AI infrastructure is via DDTLs (delayed draw term loans) – these are asset-backed project financings rather than traditional corporate debt,” Borges wrote. “By the time the contract expires, the associated debt has often been substantially or fully repaid, leaving CoreWeave to capture any residual value from the GPU fleet or potential re-leasing opportunities without the burden of ongoing interest expense.” The analyst added that CoreWeave’s “blended cost of debt” is likely to rise between 100 and 200 basis points. However, the firm should put a cap on its weighted average cost of capital “such that equity return profiles will still be attractive,” she said in a note. Goldman Sachs’ call falls in line with consensus on Wall Street. Of the 45 analysts covering CoreWeave, 31 have a buy or strong buy rating on the stock, LSEG data shows.
