Applied Digital -APLD Set to Report Q2 Earnings: Buy, Sell or Hold the Stock?

Earnings and Financial Performance - Applied Digital Corporation (APLD) is set to report its second-quarter fiscal 2025 results on Jan 14, with a Zacks Consensus Estimate for revenues of $63 65 million, indicating a year-over-year growth of 50 83% [1] - The consensus mark for loss is pegged at 14 cents per share, unchanged over the past 30 days, compared to a loss of 10 cents per share in the year-ago quarter [1] - APLD shares have appreciated 11% in the trailing 12 months, underperforming the broader Finance sector's return of 22% and the Zacks Financial Miscellaneous Services industry's appreciation of 19 1% [4] Growth Drivers and Strategic Initiatives - APLD benefits from strong top-line growth driven by its next-generation digital infrastructure for High-Performance Computing (HPC) applications, cloud services, and data center hosting [3] - The company is accelerating the monetization of its more than 1 4 gigawatt pipeline and expects to deploy additional clusters in the second half of fiscal 2025 [8] - APLD has a rich partner base, including NVIDIA, Super Micro Computer, Hewlett Packard, and Dell Technologies, which supports its growth prospects [8][12] - The company is finalizing a lease agreement with a U S -based hyperscaler for its 100 MW facility at the Ellendale HPC campus, with plans to increase total capacity to 400 MW [11] Valuation and Market Position - APLD's forward 12-month Price/Sales (P/S) ratio is 5 4X, higher than its median of 2 55X and the industry's 2 62X, indicating a stretched valuation [10] - The company carries a Zacks Rank 3 (Hold), suggesting investors wait for a better entry point to accumulate the stock [13] Operational Highlights - APLD recently refinanced a senior secured credit facility, lowering the overall cost of capital for its Ellendale HPC data center campus, and secured$ 150 million in debt financing with Macquarie Equipment Capital [9] - The company successfully energized its on-site main substation transformer in Ellendale, and its data center hosting business operates at full capacity with 106 MW in Jamestown, ND, and 180 MW in Ellendale, ND [15] - APLD entered into definitive agreements for a $160 million private placement on Sept 5, 2024, improving its liquidity position [16]