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Needham has reaffirmed its positive stance on Applied Blockchain Inc (NASDAQ: APLD), maintaining a Buy rating and a price target of $11.00.
The firm's update followed the company's earnings report, which highlighted the progress of a significant high-performance computing (HPC) lease with a major hyperscaler. Management indicated that the deal is 98% complete and currently in the "clerical" phase of finalization.
The analyst noted that while the lease has not been finalized, the process is expected to take a few more weeks or potentially longer. Despite the delay, the expectation is that Applied Blockchain will operationalize a site sooner than most of its competitors. The only exception noted was Core Scientific Inc, which already has a signed lease, whereas no other peer has secured a letter of intent (LOI) yet.
The report detailed that the first phase of the agreement, concerning a 100 megawatt (MW) lease, is anticipated to precede the subsequent 300MW, which will be finalized at a later stage. Management at Applied Blockchain remains confident in the hyperscaler's demand for the full 400MW capacity of the campus.
In other recent news, Applied Digital reported a 67% increase in revenue, reaching $60.7 million in the fiscal first quarter of 2025. This surge was primarily driven by the strong performance of their data center hosting and cloud services segments. However, despite the revenue increase, the company saw an adjusted net loss of $21.6 million.
In addition to the financial results, Applied Digital has announced strategic investments and progress on Ellendale HPC campus construction. Changes in the executive team were also noted, with CFO David Rench transitioning to Chief Administrative Officer and Saidal Mohmand stepping in as the new CFO.
The company is nearing completion of its current projects, with 98.5% to 99% progress, and anticipates finalizing lease negotiations within six to eight weeks. Despite facing a net loss, Applied Digital has seen robust revenue growth and strong market demand for its upcoming GPU cluster deployments.
InvestingPro Insights
Recent data from InvestingPro adds context to Needham's bullish outlook on Applied Blockchain Inc (NASDAQ: APLD). The company's revenue growth has been impressive, with a 198.92% increase over the last twelve months as of Q4 2024, reaching $165.57 million. This aligns with the InvestingPro Tip that analysts anticipate sales growth in the current year, supporting the potential for the company's expansion plans, including the significant HPC lease discussed in the article.
However, investors should note that APLD's profitability remains a concern. The company reported an operating income margin of -49.06% for the same period, and an InvestingPro Tip indicates that analysts do not anticipate the company will be profitable this year. This underscores the importance of the pending HPC lease in potentially improving the company's financial position.
The stock's recent performance has been strong, with a 26.28% price return over the last three months, despite a 7.96% decline in the past week. This volatility is consistent with another InvestingPro Tip, which notes that APLD stock generally trades with high price volatility.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for APLD, providing a deeper understanding of the company's financial health and market position.
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