TeraWulf Stock Keeps Falling, but Morgan Stanley Sees 463% Upside

Morgan Stanley says TeraWulf’s data-center contracts and cash position support a valuation well above its battered share price.

Key Points

• TeraWulf shares fell 8.6% on Thursday, extending a 29% decline for the month amid concerns over rising borrowing costs.
• Morgan Stanley analyst Stephen Byrd reiterated an Overweight rating and a $65 price target for TeraWulf, representing 463% upside.
• Investors worry TeraWulf may need to issue shares to fund data centers, but Byrd says its cash and contract terms help mitigate dilution risks.

TeraWulf shares extended their October decline Thursday as concerns about rising borrowing costs weighed on artificial-intelligence infrastructure stocks. Morgan Stanley, however, sees a rare buying opportunity for the Bitcoin miner turned data-center operator.

Shares of TeraWulf fell 8.6% to $10.54 and were on pace to close lower for a fourth consecutive session. The stock has declined 23% over the losing streak and 29% this month, according to Dow Jones Market Data.

Morgan Stanley analyst Stephen Byrd reiterated his Overweight rating and $65 price target for TeraWulf in a note Thursday, representing 463% upside from Wednesday’s closing price of $11.54. He argued TeraWulf’s recent stock decline fails to reflect the value of its existing data-center contracts and potential future agreements.

Even Morgan Stanley’s bearish scenario suggests TeraWulf is undervalued. Byrd’s $17.50 bear-case valuation, based largely on TeraWulf’s existing contracts, represents 52% upside from Wednesday’s closing price.

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TeraWulf, which has shifted its operations from Bitcoin mining to developing AI data centers, signed a 20-year lease with Anthropic in July valued at about $19 billion in contracted revenue.

Byrd pointed to TeraWulf’s growing portfolio of data-center projects, which Morgan Stanley estimates could generate about $1.5 billion in annual net operating income once completed.

“We rarely see a stock as mispriced as WULF and other powered shell providers,” Byrd wrote.

TeraWulf requires significant financing to build out its data centers, raising concerns among investors that the company may need to issue additional shares to cover construction costs, diluting existing shareholders.

Byrd argued that TeraWulf is better positioned to withstand those pressures than investors appreciate. He cited the company’s roughly $3 billion in cash, cash equivalents, and restricted cash as of June 30, as well as contractual provisions that could shift some increases in borrowing costs to tenants.

Morgan Stanley also expects an additional 336 megawatts of data-center capacity to come online by early 2027, potentially providing TeraWulf with additional cash flow to finance future projects and reduce its reliance on issuing new shares.

Analysts have an average Buy rating and an average price target of $33.28 for TeraWulf, implying roughly 188% upside from Wednesday’s close, according to FactSet.

Write to Ty Roush at tyler.roush@barrons.com

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