Morgan Stanley cut its TeraWulf price target to $47 on higher discount rates while keeping an Overweight rating.

Morgan Stanley cut its price target on TeraWulf (NASDAQ: WULF) to $47 from $65 on Tuesday, while keeping its Overweight rating after the company's third-quarter results. Analyst Stephen Byrd attributed the cut to higher discount rates and pipeline borrowing costs. The new target implies about 280% upside from TeraWulf's $12.38 close on November 9.

The bank raised the discount rate on unstabilized signed sites to 9% from 7%. Stabilized sites remain at 7%. Pipeline discount rates rose to 11% for hyperscaler tenants and 14% for neoclouds, up from 9% and 12%, respectively. Modeled debt coupons moved to 8.5% and 12.5%, from 7% and 10%. On an 80/20 hyperscaler-neocloud mix, these inputs yield an 11.6% blended pipeline discount rate and a 9.3% blended coupon.

These changes lowered the modeled value of TeraWulf's other owned sites to $8.19 per watt from $11.53. In the sum-of-the-parts analysis, other sites now contribute $27.88 per share, down from $38.99, and signed HPC leases contribute $16.08, down from $21.34. The bull case falls to $98.50 from $104.50, and the bear case falls to $11.50 from $17.50.

TeraWulf reported $76.2 million in third-quarter revenue, compared with $44.8 million in the second quarter. Of that total, $63.0 million came from HPC leases, about 83% of revenue. Rent alone rose 71% sequentially to $46.0 million. Adjusted EBITDA was negative $12.8 million. The company's $709.9 million net income came mostly from a $728.4 million non-cash warrant gain, as earnings coverage noted.

Morgan Stanley counts 839 MW of contracted critical IT capacity and about $27 billion of contracted revenue, with 102 MW operating at quarter-end. Lake Mariner targets 168 MW in November and December and another 168 MW in the first quarter of 2027. That would bring operating critical IT capacity to 438 MW.

At the 401 MW Justified campus, the bank said Google's credit backstop improves access to debt, though the coupon, proceeds and covenants remain open. Fluor's guaranteed-maximum-price contract limits its overrun responsibility to a percentage of its profit. Morgan Stanley cited this as a reason to maintain a higher discount rate on assets under construction. "We protect our economics," CEO Paul Prager said on the earnings call.

TeraWulf ended September with about $2.4 billion in cash, equivalents and restricted cash, and its revolver commitments rose to $400 million. Management said it can fund remaining Lake Mariner commitments, Justified equity and interim Muskie letters of credit "all without accessing the equity capital markets."

Morgan Stanley held its $65 target in October. Its August cut to $62.50 from $72 was driven mainly by a larger share count rather than financing costs.