Applied Digital Corporation APLD is set to report its second-quarter fiscal 2025 results on Jan. 14.
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 30 days. APLD reported a loss of 10 cents per share in the year-ago quarter.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Let’s see how things are shaping up prior to this announcement.
Applied Digital Corporation Price and EPS Surprise
Applied Digital Corporation price-eps-surprise | Applied Digital Corporation Quote
Factors to Consider for APLD’s Q2 Earnings
Applied Digital, 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. The trend is expected to have continued in the to-be-reported quarter.
APLD’s access to 100s of MWs of affordable energy and its ability to construct quality AI data centers are driving prospects.
APLD Shares Underperform Sector, Industry
APLD shares have appreciated 11% in the trailing 12 months, underperforming the broader Finance sector’s return of 22% and the Zacks Financial Miscellaneous Services industry’s appreciation of 19.1%.
One-Year Performance Chart
Image Source: Zacks Investment Research
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 5.4X, higher than its median of 2.55X and the industry’s 2.62X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
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 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.
APLD Shares – Buy, Sell or Hold?
Applied Digital’s expanding data center capacity bodes well for its prospects. Its prospects benefit from an improving liquidity position.
On Sept. 5, 2024, the company 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.
Hence, investors who already own the stock may expect APLD’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.
Currently, Applied Digital carries 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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