Volatility in Applied Digital May Create an Entry Opportunity

Core Viewpoint - Applied Digital Corp. (APLD) experienced significant stock volatility following its earnings report, with a notable 67% revenue increase to $60.7 million, despite a loss of 15 cents per share, which was better than analysts' expectations of a 29 cents loss [1][2][3] Financial Performance - Revenue increased by 67% to $60.7 million, following a nearly 100% year-over-year increase from $22 million to $43.7 million in the previous quarter [2] - The company reported a loss of 15 cents per share, which was lower than the expected loss of 29 cents per share by analysts [2] Stock Performance - APLD stock initially gained 4% in after-hours trading but then fell by 12.8% in pre-market trading, before recovering to about 6% above its previous close, remaining approximately 4% below its October 9 closing price [1][2] - The stock has increased by 147% over the last six months and over 14% in the month leading up to the earnings report [3] Market Context - The data center market is projected to reach $418 billion by 2030, indicating a compound annual growth rate (CAGR) of 9.6%, driven by demand from generative AI [5] - Applied Digital is focusing on the data center space, having changed its name from Applied Blockchain to reflect this shift [4] Strategic Developments - The company is finalizing a lease for 100 megawatts with a U.S.-based hyperscaler, with an additional reservation for 300 megawatts, indicating growing demand for capacity [6] - Short interest in APLD stock increased by 9.4% in the month prior to earnings, suggesting some investor caution [3] Analyst Sentiment - Analysts remain bullish on APLD, with a 12-month stock price forecast averaging $9.67, indicating a potential upside of 40.30% [8] - Three analysts have reiterated a Buy rating post-earnings, with price targets ranging from $10 to $12, the highest being $12 from Craig Hallum [8]