Applied Digital Stock Rises 48% in 6 Months: Buy, Sell or Hold?

Applied Digital Corporation APLD shares have appreciated 47.9% in the past six months, outperforming the broader Finance sector’s return of 15.6% and the Zacks Financial Miscellaneous Services industry’s appreciation of 3.9%. This builder and operator of next-generation digital infrastructure designed for High-Performance Computing (HPC) 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. The Data Center hosting segment generated $34.8 million in revenues, while the 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.Growing complexity and power requirement of AI models due to significant rise in the number of parameters is driving higher energy consumption. Data centers’ electricity consumption is projected to grow 125% by 2030, using 9% of all electricity in the United States. APLD’s access to 100s of MWs of affordable energy and its ability to construct quality AI data centers is driving its prospects.Six Month Performance Image Source: Zacks Investment Research Expanding Data Center Capacity to Aid APLD’s GrowthApplied Digital is on track to finalize the lease agreement with a U.S.-based hyperscaler for its 100 MW facility at the Ellendale HPC campus, 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. APLD recently announced the successful energization of its on-site main substation transformer in Ellendale, HPC center.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 Dec. 1.APLD has a rich partner base that includes NVIDIA NVDA, Super Micro Computer, Hewlett Packard HPE and Dell Technologies DELL.As 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 ProspectsAPLD’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.Applied Digital recently refinanced a senior secured credit facility with a former senior lender that lowers the overall cost of capital for its Ellendale HPC data center campus. It secured a $150 million debt financing with Macquarie Equipment Capital, a division of Macquarie Group’s Commodities and Global Markets business.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 TrendThe 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 40 cents per share, which has narrowed from a loss of 45 cents per share over the past 60 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 14 cents per share unchanged over the past 60 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 PremiumWe 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 5.08X, higher than its median of 2.34X and the industry’s 2.63X.Price/Sales Ratio (F12M) Image Source: Zacks Investment Research 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, the company’s stretched valuation is a concern for investors. Higher expenses related to data center leases for APLD’s cloud business that are yet to GPU clusters and generate any revenue is 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.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dell Technologies Inc. (DELL): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Hewlett Packard Enterprise Company (HPE): Free Stock Analysis Report Applied Digital Corporation (APLD): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks