Applied Digital's Stock Recovery: Analysts Forecast Strong Upside

Core Viewpoint - Applied Digital (NASDAQ: APLD) has experienced significant stock decline since its IPO in April 2022, with shares down 56% and a recent drop of 13.38% to $3.82, despite a bullish average price target of $8.20 indicating a potential upside of 110% [1][2][8]. Company Overview - Applied Digital specializes in high-performance computing (HPC) and operates data centers, providing hosting services for both AI tasks and cryptocurrency mining [4][6]. - The company initially focused on cryptocurrency mining but rebranded from Applied Blockchain to Applied Digital in November 2022 due to poor performance and a need to diversify its offerings [5][6]. Financial Performance - In the latest earnings report, Applied Digital reported revenue of $47.3 million, nearly doubling from the previous year but remaining flat compared to the prior quarter, surpassing analyst expectations of $39.1 million [7][8]. - The company posted an adjusted loss of $0.36 per share, which is a larger loss than the previous quarter and worse than the expected loss of $0.22 per share [7][8]. Margin and Cost Challenges - The gross margin has been negative for two consecutive quarters, attributed to high energy costs, depreciation, and personnel expenses, raising concerns about the sustainability of profitability [8][10]. - The current negative gross margin may be influenced by unusually high electricity prices, but the company has not provided guidance on future energy costs [10]. Strategic Developments - Applied Digital has signed a letter of intent (LOI) with a U.S. hyperscaler customer for 400 MW of capacity for its cloud business, although this agreement is non-binding and did not positively impact the share price [9].