Applied Digital Corporation APLD shares have appreciated 22.7% year to date, outperforming the broader Finance sector’s return of 18.4% and the Zacks Financial Miscellaneous Services industry’s appreciation of 9.8%.
This designer, builder, and operator of next-generation digital infrastructure designed for high-performance computing applications, cloud services, and data center hosting has been benefiting from strong top-line growth.
In first-quarter fiscal 2025, revenues jumped 67% year over year to $60.7 million, driven by strong contributions from Cloud Services contracts. Data Center hosting segment generated $34.8 million in revenues, while Cloud Services segment contributed $25.9 million.
APLD added two additional clusters to Cloud Services Business, increasing the total to six clusters, each containing 1,024 GPUs.
Year-to-Date Performance
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Expanding Data Center Capacity to Aid APLD’s Growth
Applied Digital is on track to finalize the lease agreement with a U.S.-based hyperscaler for its 100 MW facility, which is currently under construction. This state-of-the-art, more than 369,000-square-foot facility is specifically designed for HPC applications, including AI.
APLD is in the design phase for two additional buildings at this location, increasing the total capacity to 400 MW.
Its Data Center Hosting Business operates data centers to provide energized space to crypto mining customers. As of Aug. 31, 2024, Applied Digital’s 106 MW facility in Jamestown, ND and 180 MW facility in Ellendale, ND, were operating at full capacity.
Applied Digital is planning to accelerate the monetization of its more than 1.4 gigawatt pipeline. It expects to deploy additional clusters in the second half of fiscal 2025, which begins December 1.
APLD also has a rich partner base that includes NVIDIA NVDA, Super Micro Computer, Hewlett Packard HPE and Dell Technologies DELL.
As a part of Applied Digital’s partnership with Hewlett Packard, the latter provides powerful and energy-efficient supercomputers to support large-scale AI through APLD’s cloud service. It has supply agreements with Dell for the delivery of AI and GPU servers.
Improving Balance Sheet Bodes Well for APLD Prospects
APLD’s prospects benefit from an improving liquidity position. On Sept. 5, 2024, it entered into definitive agreements for a $160 million private placement with a group of institutional and accredited investors, including NVIDIA.
It ended the first quarter of fiscal 2025 with $86.6 million in cash, cash equivalents, and restricted cash compared with $31.7 million as of the end of fiscal 2024. It had $143.6 million in debt compared with $125.4 million as of the end of fiscal 2024.
APLD’s Estimates Show Upward Trend
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $270.77 million, indicating year-over-year growth of 63.54%.
The consensus mark for loss is pegged at 69 cents per share, which has narrowed significantly from a loss of $1.12 per share over the past 30 days and narrower than the loss of $1.31 per share reported in the year-ago quarter.
The Zacks Consensus Estimate for second-quarter fiscal 2025 revenues is pegged at $63.65 million, indicating year-over-year growth of 50.83%.
The consensus mark for loss is pegged at 20 cents per share narrower than loss of 34 cents over the past 30 days. APLD reported a loss of 10 cents per share in the year-ago quarter.
Applied Digital Corporation Price and Consensus
Applied Digital Corporation price-consensus-chart | Applied Digital Corporation Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
APLD Shares Trade at a Premium
We point out that Applied Digital stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales (P/S) ratio, APLD is trading at 5.58X, higher than its median of 1.82X and the industry’s 2.51X.
Price/Sales Ratio (F12M)
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What Should Investors Do With APLD Shares?
Applied Digital’s expanding data center capacity bodes well for its prospects. Hence, investors who already own the stock may expect the company’s growth prospects to be rewarding over the long term.
However, Applied Digital’s stretched valuation is a concern for investors. Higher expenses related to data center leases for APLD’s cloud business are a headwind.
Applied Digital currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a better entry point to accumulate the stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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