Key Takeaways
- Applied Digital stock has lost 46% over the past year, and Roth MKM restarted coverage on Oct. 21 with a Buy rating and a $35 price target, 81% above the Oct. 20 close.
- Roth’s target values the stock at about 10.3x forward sales, close to its 3-year average of 10.6x, against 5.7x today.
- The main risks are losses and debt: analysts expect a wider loss for fiscal 2027 than they did a month ago, and three campuses still need financing.
- The numbers back Roth’s call, and the financing of those campuses is the thing to watch.
Applied Digital (APLD) closed at $19.33 on Oct. 20, down 46% from a year earlier. On Oct. 21, Roth MKM analyst Bryan Baratian restarted coverage with a Buy rating and a $35 price target, 81% above that close.
Losses and rates did the damage
The latest leg down started with results on Oct. 7. Revenue jumped 322% to $341.9 million in the quarter ended Aug. 31, but the net loss widened to $221.0 million from $18.5 million a year earlier.
Then on Oct. 14, AI infrastructure stocks carrying heavy debt slumped as traders bet on a US rate hike. As of Aug. 31, Applied Digital had $6.4 billion of debt against $3.7 billion of cash, and its quarterly interest expense had jumped to $77.4 million from $8.0 million.
Roth sees “asymmetric upside”
“We believe the current valuation provides investors with asymmetric upside,” Baratian said. He argues that Applied Digital has moved from signing leases to delivering capacity.
The delivery part holds up. Management expects to put more than 600 MW into service over the next 12 months, against 250 MW over the past 12.
TIKR tracks 15 analysts on Applied Digital. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Applied Digital, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Applied Digital’s Analyst Ratings
Does $35 add up?
Wall Street hasn’t followed the stock down…
The consensus target climbed from $43 a year ago to $77 in mid-July. It sits at $62 now, with targets running from $22 to $93.
Analysts also expect sales to keep climbing fast…
Analysts see that revenue will add up to $ 958 million in fiscal 2027 (the year to May 2027) and $1.95 billion in fiscal 2028, up from $611 million in fiscal 2026. The losses are heading the wrong way, though. The consensus for fiscal 2027 is now a loss of $1.06 a share, wider than $0.95 a month ago, and only three analysts make that estimate.
Meanwhile, at 5.7x forward sales, the stock trades at about half its 3-year average of 10.6x…
Divide Roth’s $35 by the roughly $3.40 a share of sales analysts expect over the next 12 months, and you get about 10.3x. That’s right around the average.
Roth isn’t asking for much
The balance sheet is where the risk sits. Polaris Forge 3, Delta Forge 1, and Delta Forge 2 still need financing, and higher rates would make that more expensive.
Even so, the numbers back Roth’s call. Its $35 target only needs the stock to trade at its usual multiple on sales the Street already expects, and that’s half the Street’s $70 median target.
The financing is the thing to watch, along with the roughly 250 MW of expansion leases management expects to sign by year-end at “materially higher pricing.” If those deals land on good terms, $35 could end up looking conservative.
So what is Applied Digital stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
