Key Takeaways
- Morgan Stanley cut its Applied Digital target to $25 from $41 on Nov. 9, keeping its Equal Weight rating.
- Interest ran well ahead of base rent last quarter, and roughly 800 MW still needs funding.
- Up to $4.6 billion of revenue bonds could fund the Louisiana campus, reportedly leased to Meta.
- The cut looks right: the stock is now a bet on Applied Digital’s next financing.
Applied Digital (APLD) closed at $17.91 on Nov. 11, up 7.4% but 64% below its 52-week closing high, and Morgan Stanley has lowered its sights to match. On Nov. 9, analyst Stephen Byrd cut his price target to $25 from $41 and kept his Equal Weight rating.
Even the lower target sits 40% above that close, so the cut is a call on what it costs to finish the build. Lenders will look partly at its tenants, including CoreWeave (CRWV) and, reportedly, Meta Platforms (META).
Money Got More Expensive
Morgan Stanley raised its target to $41 right after Applied Digital’s Oct. 7 report, when fiscal first-quarter revenue jumped 322% to $341.9 million. A Nov. 4 Byrd note also named Applied Digital a relative beneficiary of Texas’s election, since its signed sites are elsewhere; its only Texas project is a planned 50 MW site with Soluna.
What changed is the price of money. The Nov. 9 note raised the discount rates and debt costs Morgan Stanley assumes across the group, while leaving Applied Digital’s odds of energizing its sites alone. On Nov. 2, CEO Wes Cummins told CNBC that Applied Digital still needs funding for roughly 800 MW over the next 12 months. The bond market is “still available for us,” he said, at a price.
Rent Is Still the Smaller Number
In the quarter ended Aug. 31, Applied Digital booked $65.8 million of base rent. Interest came to $113.1 million, counting what it capitalized, and Macquarie’s preferred investors were paid another $60.1 million in kind.
The rent is coming: minimum payments on signed leases total $468.0 million for the rest of fiscal 2027, then $1.58 billion in fiscal 2028 and $2.36 billion in fiscal 2029. But CoreWeave, whose Polaris Forge 1 lease is worth about $11.0 billion, had bonds yielding over 17% before its Nov. 10 report. The 300 MW Louisiana campus, reportedly leased to Meta, could back up to $4.6 billion of local revenue bonds, though no rate is set yet.
TIKR Tracks 16 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 $25 Add Up for Applied Digital Stock?
Analysts’ average target peaked at $77 in July and sits at $60 now, 235% above the Nov. 11 close:
Analysts don’t see a profit through fiscal 2029. Consensus calls for losses of $1.06 a share in fiscal 2027, $0.78 in 2028 and $0.52 in 2029:
The stock traded at 4.9x forward sales at the Nov. 10 close, less than half its three-year average of 10.6x:
On those same forward sales, $25 is about 7.3x, still below that average, and sales should be larger by the time the target is due.
A Bet on Applied Digital’s Next Bond Deal
The other risk is more stock: shares outstanding rose to 302.39 million on Oct. 6 from 287.88 million on May 31.
Morgan Stanley’s cut looks right to me. If the build gets funded at a rate the rent can carry, $25 is conservative. If not, more stock and wider losses push the Street’s $60 well out of reach.
Watch the rate on those Louisiana bonds first, then the fiscal second-quarter report expected in January.
So What Is Applied Digital Stock Actually Worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Applied Digital could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Value Applied Digital for free
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!
