Cantor Fitzgerald cuts Applied Blockchain target to $7 from $14

Published 15/04/2025, 12:48
Cantor Fitzgerald cuts Applied Blockchain target to $7 from $14

On Tuesday, Cantor Fitzgerald analyst Brett Knoblauch revised the price target for Applied Blockchain Inc (NASDAQ:APLD) to $7.00, a significant decrease from the previous target of $14.00. The stock currently trades at $5.37, with InvestingPro data showing significant price volatility and a beta of 5.02, indicating higher market sensitivity than average. Despite the adjustment, the firm maintained its Overweight rating on the company’s shares. Knoblauch reiterated management’s previous statements about progressing with multiple hyperscalers and mentioned that an update on lease discussions was expected soon, though no specific timeframe was provided.

The analyst expressed confidence in the company’s prospects, particularly regarding the potential of the Ellendale facility, which is equipped with direct-to-chip cooling capacity. With a market capitalization of $1.2 billion and impressive revenue growth of 84.57% over the last twelve months, the company shows strong expansion potential despite rapid cash consumption. (InvestingPro subscribers have access to 16 additional key insights about APLD’s financial health and growth prospects.) This feature is anticipated to support Blackwell, and NVDA (also rated Overweight by colleague C. Muse) has recently invested in Applied Blockchain. Nonetheless, Knoblauch acknowledged some risk to the equity value following the financing agreement with Macquarie.

The revised valuation reflects a lowered expected yield on cost for the 400 MW Ellendale campus, now at 8.5%, which translates to a value of $6 per share using a 6% capitalization rate. This is a decrease from the prior estimate of $12 per share. Additionally, the valuation of the rest of the business has been reduced to $1 per share from $2 per share. The combined adjustments led to the new price target of $7 per share.

Knoblauch concluded by affirming the Overweight rating, suggesting that the Ellendale campus could potentially be worth more than the current trading price of the shares. According to InvestingPro’s Fair Value analysis, APLD appears fairly valued at current levels, with analyst targets ranging from $7 to $20, suggesting potential upside. Discover comprehensive valuation metrics and detailed financial analysis in APLD’s Pro Research Report, part of InvestingPro’s coverage of over 1,400 US stocks. He also noted that there is room for upside in the base case yield on cost, with each 1% increase adding approximately $2-3 to the share value.

In other recent news, Applied Digital Corp reported its Q3 FY2025 earnings with a net loss of $0.08 per share, exceeding analysts’ expectations of a $0.11 loss. However, the company fell short of revenue forecasts, reporting $52.9 million against the anticipated $64.96 million. The data center hosting segment was a major revenue contributor, generating $35.2 million, while the cloud services segment added $17.8 million. Despite the revenue miss, the company’s adjusted EBITDA increased significantly to $10 million, marking an 878% improvement. Applied Digital is also exploring strategic options for its cloud services business, which could lead to a sale or restructuring. The company secured significant financing from Macquarie Asset Management and Sumitomo Mitsui (NYSE:SMFG) Banking Corporation to support its operations and future growth. Analysts from firms like Riley Securities and Cantor Fitzgerald have shown interest in the company’s strategic direction, particularly concerning the potential sale of the cloud services business. These developments highlight Applied Digital’s ongoing efforts to navigate market challenges and capitalize on growth opportunities.

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