Applied Digital Corporation: Strong Growth and Promising Future
Applied Digital Corporation (APLD) has seen its shares rise 22.7% this year, surpassing the Finance sector’s return of 18.4% and the Zacks Financial Miscellaneous Services industry’s growth of 9.8%.
This company designs, builds, and operates advanced digital infrastructure tailored for high-performance computing, cloud services, and data center hosting. Its strong revenue growth is a key factor behind its recent success.
In the first quarter of fiscal 2025, Applied Digital’s revenues surged 67% compared to the previous year, reaching $60.7 million. This rise primarily stemmed from robust Cloud Services contracts, with the Data Center hosting segment contributing $34.8 million and the Cloud Services segment adding $25.9 million.
Impressive Year-to-Date Performance
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Expansion of Data Center Capacity Supports Growth
Applied Digital is nearing a lease agreement with a U.S.-based hyperscaler for a 100 MW facility currently under construction. This facility, over 369,000 square feet, is designed for high-performance computing (HPC) applications, including AI technologies.
Additionally, APLD is working on designs for two more buildings at this site to increase total capacity to 400 MW.
The company’s Data Center Hosting Business operates facilities that provide space to crypto mining customers. By August 31, 2024, APLD’s 106 MW facility in Jamestown, ND, and its 180 MW facility in Ellendale, ND, were operating at full capacity.
Applied Digital plans to monetize its more than 1.4 gigawatt pipeline, with expectations to deploy additional clusters in the second half of fiscal 2025, starting December 1.
Having a strong partner network is beneficial; APLD collaborates with NVIDIA (NVDA), Super Micro Computer, Hewlett Packard (HPE), and Dell Technologies (DELL). As part of its partnership with Hewlett Packard, the latter supplies powerful, energy-efficient supercomputers through APLD’s cloud services, alongside a supply agreement with Dell for AI and GPU servers.
Strong Balance Sheet Enhances Future Prospects
APLD’s financial outlook is bolstered by improving liquidity. On September 5, 2024, the company secured a $160 million private placement from institutional and accredited investors, including NVIDIA.
As of the end of the first quarter in fiscal 2025, APLD maintained $86.6 million in cash, cash equivalents, and restricted cash, a significant increase from $31.7 million at the close of fiscal 2024. Its debt was $143.6 million, compared to $125.4 million one year prior.
Positive Revenue Estimates for APLD
The Zacks Consensus Estimate forecasts fiscal 2025 revenues at $270.77 million, reflecting a year-over-year growth of 63.54%. The estimated loss is now expected to be 69 cents per share, showing notable improvement from a loss of $1.12 just a month earlier and from a loss of $1.31 reported in the same quarter last year.
For the second quarter of fiscal 2025, the revenue estimate stands at $63.65 million with a year-over-year growth of 50.83%. The loss estimate has improved to 20 cents per share, compared to the previous 34 cents and a loss of 10 cents per share in the prior year.
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.
Currently, APLD stock is considered a bit expensive. Its Value Score of F suggests a stretched valuation. The forward 12-month Price/Sales (P/S) ratio is 5.58X, significantly exceeding its median of 1.82X and the industry’s 2.51X.
Price/Sales Ratio (F12M)
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The expansion of Applied Digital’s data center capacity is promising for future growth, suggesting that current shareholders can look forward to potential long-term rewards. However, the company’s stretched valuation raises concerns. Increased expenses related to leasing data center space could be a challenge for future profitability.
Currently, APLD holds a Zacks Rank #3 (Hold), indicating that investors may prefer to wait for a more favorable entry point to purchase shares.
You can examine the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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