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On Friday, Cantor Fitzgerald initiated coverage on Applied Blockchain Inc (NASDAQ:APLD), assigning an Overweight rating and setting a price target of $15.00.
The firm expressed confidence in Applied Blockchain's potential to become a significant operator of high-performance compute (HPC) data centers in the United States. The company's 100 MW data center in Ellendale is anticipated to be the first among many HPC data centers.
The analyst from Cantor Fitzgerald highlighted Applied Blockchain's strategy of building its infrastructure in anticipation of demand, noting ongoing negotiations with a major client referred to as "Hyperscaler 1." The firm estimates an approximately 80% chance that a lease with this client will be signed by the end of January. If the current negotiations were to falter, the analyst expects a leasing delay of 2-3 months as other potential clients become acquainted with the project.
Cantor Fitzgerald's outlook remains highly optimistic regarding the demand for Applied Blockchain's services. The firm's analysis suggests that the question is not if but when a deal will be finalized, and what the value of such a deal would be.
They are applying a capitalization rate of 6% to the potential net operating income (NOI) from the 400 MW capacity at Ellendale. This rate is considered conservative by the firm, as their discussions with real estate investment trust (REIT) and data center specialists indicate a cap rate closer to a low 5% might be more appropriate.
As Applied Blockchain progresses with its construction and mitigates execution risks, Cantor Fitzgerald anticipates that the market will more accurately recognize the value of the company's assets.
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