Applied Digital Shares Rise 23% Year to Date: To Buy or Not to Buy?

Core Viewpoint - Applied Digital Corporation (APLD) has shown strong performance in the market, with a year-to-date share appreciation of 22.7%, surpassing the broader Finance sector and the Zacks Financial Miscellaneous Services industry [1] Financial Performance - In the first quarter of fiscal 2025, APLD's revenues increased by 67% year over year to $60.7 million, primarily driven by Cloud Services contracts [2] - The Data Center hosting segment generated $34.8 million, while the Cloud Services segment contributed $25.9 million [2] - The Zacks Consensus Estimate for fiscal 2025 revenues is projected at $270.77 million, indicating a year-over-year growth of 63.54% [8] - The second-quarter fiscal 2025 revenue estimate is pegged at $63.65 million, reflecting a year-over-year growth of 50.83% [9] Operational Expansion - APLD is finalizing a lease agreement with a U.S.-based hyperscaler for a 100 MW facility currently under construction, designed for high-performance computing applications [3] - The company is also in the design phase for two additional buildings, which will increase total capacity to 400 MW [3] - APLD's Data Center Hosting Business operates facilities that are currently at full capacity, with plans to accelerate monetization of its 1.4 gigawatt pipeline [4] Partnerships and Collaborations - APLD has established partnerships with major companies including NVIDIA, Super Micro Computer, Hewlett Packard, and Dell Technologies [5] - Hewlett Packard provides supercomputers to support large-scale AI through APLD's cloud service, while Dell has supply agreements for AI and GPU servers [5] Financial Position - APLD's liquidity position has improved, with $86.6 million in cash and equivalents as of the end of the first quarter of fiscal 2025, up from $31.7 million at the end of fiscal 2024 [7] - The company has $143.6 million in debt, an increase from $125.4 million at the end of fiscal 2024 [7] Valuation and Market Position - APLD's stock is currently trading at a forward Price/Sales (P/S) ratio of 5.58X, which is significantly higher than its median of 1.82X and the industry's 2.51X, indicating a stretched valuation [10] - The company holds a Zacks Rank 3 (Hold), suggesting that investors may want to wait for a better entry point [12]