KBW upgrades TeraWulf to outperform, sees AI pivot as catalyst for sharp growth

Core Viewpoint - Investment bank KBW upgraded TeraWulf (WULF) to "outperform" from "market perform" and raised its price target to $24 from $9.50, indicating a positive outlook on the company's shift from bitcoin mining to AI and high-performance computing leasing [1] Group 1: Company Transition and Growth Potential - The market is underestimating the earnings upside from TeraWulf's transition from BTC mining to HPC leasing, with significant growth catalysts expected from a 646 MW HPC leasing pipeline through 2027 [2][3] - TeraWulf's existing leases are projected to drive a 505% EBITDA compound annual growth rate (CAGR) from 2025 to 2027, supporting multiple expansion from the current 13.8x EV/EBITDA valuation [3] Group 2: Revenue and Profit Contribution - HPC leasing is expected to generate two-thirds or more of TeraWulf's revenue in 2026, with mining becoming largely immaterial by 2027 [4] - The majority of contribution profit is anticipated to come from HPC leasing, reflecting a significant shift in the company's revenue model [4] Group 3: Market Dynamics and Valuation - The report suggests that execution risk is lower than investors assume, citing secured financing for major build-outs and a strong track record of delivery [4] - KBW expects valuation upside as lease revenues scale in 2026, leading to cap-rate compression and potential new HPC deal announcements over the next year [5]