Applied Digital's Shorts Got Squeezed—Now What?

Core Insights - Applied Digital's stock price surged by 30% in October, driven primarily by short-covering rather than fundamental improvements in the company's outlook [3][5][11] - The company reported a strong fiscal Q1, with core business growth of 85%, significantly exceeding consensus estimates [7] - Applied Digital is expanding its AI data center operations, with plans for a second facility that could double its capacity and generate an annualized net operating income (NOI) run rate of $500 million per facility, aiming for a total of $1 billion by 2028 [8][9][10] Company Performance - The core business growth of 85% in fiscal Q1 surpassed consensus by over 4,000 basis points [7] - The company is focusing on AI-driven demand, which is overshadowing its cryptocurrency-oriented operations [7] - New contracts and plans for additional AI-centric data centers are in progress, indicating strong future growth potential [8][10] Market Dynamics - Short interest in Applied Digital was over 32% in late September, contributing to the significant stock price movement [4] - Analysts have raised price targets for APLD, with a 12-month forecast average of $22.10, indicating a potential downside of 34.98% from the current price [11] - Institutional ownership exceeds 65%, with institutions buying robustly throughout the year, but the recent price surge may lead to profit-taking and increased selling pressure [13] Technical Analysis - The stock's recent surge created a bullish technical outlook, breaking critical resistance levels [14] - The potential for a pullback exists, with the stock possibly returning to previous highs near $30 before reaching new highs [14]