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Tuesday - Craig-Hallum analysts have adjusted the price target for Applied Blockchain Inc (NASDAQ:APLD) shares to $10 from the previous $12, while maintaining a Buy rating on the stock. With shares currently trading at $4.39 and a market cap of $1.2 billion, the new target still implies significant upside potential. The reduction comes after the company reported earnings that fell short of expectations, primarily due to a lower-than-anticipated Cloud Services revenue, which came in at approximately $17.7 million versus the $27 million that had been modeled. According to InvestingPro data, the stock has shown high volatility, with a beta of 5.02, making it sensitive to market movements.
The analysts noted that while higher energy costs impacted the quarter, this was somewhat balanced by reduced depreciation expenses due to a change in the GPU depreciation timeline. As a result, the Cost of Revenue for the quarter was slightly lower. However, due to the fixed costs associated with leasing Cloud Services datacenter capacity, the shortfall in top-line revenue negatively affected the company’s adjusted EBITDA. InvestingPro analysis reveals the company’s gross profit margin stands at just 2.29%, reflecting operational challenges. Despite these headwinds, revenue growth remains strong at 84.57% year-over-year.
In response to the earnings report and the financial results, Craig-Hallum has revised their future projections for Applied Blockchain. The firm has set more conservative expectations for the newly introduced on-demand GPUs and anticipates a slight delay in the expected revenue from High-Performance Computing (HPC).
Despite the lowered price target, the Buy rating suggests that Craig-Hallum analysts continue to see potential in Applied Blockchain’s stock. The revised target reflects the firm’s updated assessment of the company’s financial outlook in light of the recent earnings and the challenges faced in the quarter.
In other recent news, Applied Digital Corp reported its Q3 FY2025 earnings, revealing a net loss of $0.08 per share, which was better than analysts’ expectations of a $0.11 loss. However, the company missed revenue forecasts, reporting $52.9 million against an expected $64.96 million. The data center hosting segment was a strong contributor, generating $35.2 million in revenue. Applied Digital is also exploring strategic options for its cloud services business, which contributed $17.8 million in revenue. In a related development, Cantor Fitzgerald analyst Brett Knoblauch reduced the price target for Applied Blockchain to $7 from $14 but maintained an Overweight rating. The revised valuation reflects a lowered expected yield on cost for the Ellendale campus, now at 8.5%. Additionally, Applied Digital secured significant financing arrangements, including up to $5 billion from Macquarie Asset Management and $375 million from Sumitomo Mitsui (NYSE:SMFG) Banking Corporation. These financial moves are aimed at bolstering the company’s data center operations and exploring leasing options for the Ellendale campus.
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