Applied Digital (APLD), a North American data center market player, is making waves. Its strategic positioning was strengthened by a substantial $160 million private placement financing from a consortium of institutional investors, including NVIDIA (NVDA). The company operates at full capacity across its two North Dakota-based locations, providing a data center hosting capacity of 286 megawatts to its cryptocurrency clients.
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With an ongoing construction project for a 100 MW facility designed for high-performance computing (HPC) applications and plans to further increase capacity by designing and constructing additional buildings, Applied Digital’s trajectory makes it a potentially attractive investment opportunity in a growing industry.
Applied Digital Is Scaling Its Business
Applied Digital creates and maintains digital infrastructure solutions and cloud services for high-performance computing (HPC) and artificial intelligence industries. The company operates across three segments: Data Center Hosting Business, Cloud Services Business, and HPC Hosting Business. Essential services include offering infrastructure services to crypto mining customers and GPU computing solutions important for AI, machine learning, and other HPC tasks. Additionally, the company designs, constructs, and manages data centers to support HPC applications.
The company recently announced a $160 million private placement financing agreement from a group of institutional and accredited investors, including NVIDIA and Related Companies. This privately owned real estate company specializes in complex infrastructure and data center development.
This capital infusion comes at an opportune time as the company seeks to make significant strides in its data center operations. It is finalizing a lease agreement with a U.S.-based hyperscaler for a 100 MW facility currently being built, and it plans to add two more buildings at the same location, increasing total capacity to 400 MW. Additionally, Applied Digital recently brought two new clusters online, resulting in revenue recognition of $25.9 million from the Cloud Services Business segment.
Applied Digital’s Recent Financial Results
The company recently announced results for the first quarter of Fiscal 2025, reflecting strong financial performance. Revenues reached $60.7 million, representing a 67% year-over-year increase. This significant increase was primarily due to the company’s recognition of revenue from its newly launched Cloud Services business segment.
However, costs also increased during the quarter, rising to $61.1 million from $25.2 million in the first quarter of FY2024. The cost increase was mainly due to higher depreciation and amortization expenses, as well as lease and related expenses. This led to the company posting an adjusted net loss of $21.6 million and an adjusted net loss per share of $0.15.
As of the quarter’s end, the company reported $86.6 million in cash, cash equivalents, and restricted cash, which signaled a substantial increase from the $31.7 million at the end of Fiscal 2024. The company’s debt also increased to $143.6 million from $125.4 million as of the end of Fiscal 2024.
What Is the Price Target for APLD Stock?
The stock has been up over 37% in the past year, though it has been volatile. It trades near the high end of its 52-week price range of $2.36 – $8.79 and demonstrates ongoing positive price momentum, trading above its 20-day (7.07) and 50-day (6.17) moving averages. This ongoing growth is likely reflected in the stock’s premium valuation relative to industry peers, with a P/S ratio of 5x compared to the Information Technology Services industry average P/S ratio of 2.4x.
Analysts following the company have been bullish on the stock. Based on seven analysts’ recent recommendations, Applied Digital is rated a Strong Buy. The average price target for APLD is $10.00, representing a potential upside of 32.45% from current levels.
Final Analysis on APLD
Applied Digital is gaining momentum with strategic initiatives supported by an infusion of capital. With two established data centers operating at full capacity and an ambitious expansion plan underway, the company’s growth trajectory could signify an appealing upside. Recent financial results indicate strong revenue growth, punctuated by a substantial cash and cash equivalents increase. Although the volatility of APLD is notable, its positive momentum points to a potentially robust investment opportunity in the tech services sector.
