Is Applied Digital Stock Still a Buy After 141% Surge in 6 Months?

Core Insights - Applied Digital (APLD) shares have increased by 141.2% over the past six months, significantly outperforming the Zacks Finance sector's growth of 10.7% and the Zacks Financial – Miscellaneous Services industry's decline of 1.6% [1] - The stock's rally is attributed to rising investor confidence in APLD's transition from a speculative infrastructure developer to a contracted hyperscale data center operator [2] Financial Performance - APLD's long-term revenue visibility is supported by $11 billion in contracted lease revenues from CoreWeave, linked to a full 400-megawatt commitment at Polaris Forge 1 [5] - The Zacks Consensus Estimate for fiscal 2026 revenues is projected at $280.9 million, indicating a year-over-year increase of 30.35% [6][7] - APLD is expected to generate approximately $500 million in annual net operating income once Polaris Forge 1 is fully operational [6] Strategic Positioning - The demand for AI infrastructure has led to increased investments in purpose-built data centers, positioning APLD favorably in a constrained supply environment [7][8] - APLD's active development pipeline includes around 4 gigawatts, with 700 megawatts currently under construction, and has reduced construction timelines to 12–14 months [9] Capital Structure - APLD's capital structure, which includes preferred equity and project financing, allows for significant expansion without heavy reliance on frequent equity issuance [10] - The company has drawn $112.5 million from a $5 billion preferred equity facility to fund construction at Polaris Forge 1, unlocking an estimated $20–25 billion in capital capacity [10][11] Valuation - APLD trades at a forward 12-month price-to-sales (P/S) ratio of 18.43X, significantly higher than the Zacks industry average of 3.35X and the broader sector's multiple of 9.07X [13] - The premium valuation reflects APLD's early position in the monetization cycle, with expectations of accelerated revenue recognition as Polaris Forge assets come online [14][18]