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On Wednesday, Lake Street Capital Markets upheld their Buy rating on Applied Blockchain Inc (NASDAQ: APLD) with a consistent price target of $11.00. The firm's analyst, Rob Brown, expressed approval of the company's second-quarter performance, which surpassed expectations and marked another period of strong execution in its Bitcoin hosting and AI Cloud segments.
Both sectors are operating at near full capacity, contributing to an annualized EBITDA rate of over $80 million. According to InvestingPro data, the company has demonstrated impressive revenue growth of 124% over the last twelve months, though maintaining relatively thin gross profit margins of 3%.
Applied Blockchain's AI Cloud division performed robustly during the quarter, with six clusters now fully operational. The management intends to sustain this performance level and consider expanding with new clusters following the release of new chip designs.
While a significant pending hyperscaler contract has yet to be finalized, the analyst remains positive, citing Applied Blockchain's success in securing a long-term financing deal that supports the Ellendale facility's 400MW capacity and ensures funding for the entire 2GW pipeline.
InvestingPro analysis reveals the company's stock exhibits high volatility with a beta of 4.64, making it crucial for investors to monitor its execution carefully. Get access to 15+ additional ProTips and comprehensive analysis with an InvestingPro subscription.
The financing arrangement is expected to alleviate investor concerns regarding funding and bolster confidence among potential customers. Looking ahead to 2025, the analyst anticipates that progress in new lease agreements could serve as a key driver for the company's stock performance.
Lake Street's $11 price target for Applied Blockchain's stock is derived from allocating $2 per share for the base business and $9 per share for the planned 400MW AI data center capacity. This valuation reflects the firm's confidence in the company's earnings potential and its strategic initiatives to expand its data center capabilities.
With the stock currently trading at $8.54, analyst targets range from $9 to $14, suggesting potential upside. InvestingPro's exclusive Fair Value model indicates the stock is currently fairly valued, with additional detailed insights available in the comprehensive Pro Research Report.
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