CoreWeave slips early, then steadies, as HSBC holds $39 target and its bonds trade near 80 cents

HSBC reiterated its Reduce rating and $39 price target on CRWV in a Monday note, implying about 36.5% downside. The shares fell about 4% to $58.67 in early trading on Tuesday, Oct. 20, per 24/7 Wall St, but recovered as the session went on: MarketBeat had them at $63.29 by mid-morning against a $61.12 prior close, and SentiSense market data shows them finishing near $62.13, up about 1.7%.

The note goes after the economics, not only the leverage. HSBC models about $12 million of annual revenue per megawatt in 2027, against an estimated $17 million to $18 million for larger cloud providers. Its 2028-2030 non-GAAP EPS estimates sit 50% to 70% below consensus, and it sees long-term operating margins of 15% to 16% versus management's target of about 25%. HSBC also pointed to bond yields near 15% as a sign of market concern over CoreWeave's financing risk.

The credit market is where that concern shows. Benzinga reported the 9.75% notes due October 2031 trading near 80.6 cents on the dollar on Tuesday, a yield of about 15.6%, and Bloomberg Opinion argued the CoreWeave bond rout should make the Federal Reserve cautious. The stock lost more than 25% last week, its worst week since November, on the same credit-market fears.

The Street is split. Goldman Sachs upgraded CoreWeave to Buy from Neutral on Monday with a $106 target, and Bernstein moved it to Hold from Strong Sell, per MarketBeat. A Zacks piece syndicated by The Globe and Mail argued the debt worries may be overblown, citing JPMorgan's estimate of mid-teens unlevered returns against a 9% to 11% blended cost of capital. CoreWeave reports a backlog of about $104 billion. What to watch: whether the 2031 notes hold near 80 cents, any credit rating action, and how the next quarterly report addresses financing.