The stock price of Applied Digital (APLD), has gone parabolic over the past few weeks, making it one the best performing companies on Wall Street. The stock soared to $6.60, the highest level since July 17th. It is also 120% higher than its lowest point in this month. It has also risen by 177% since its lowest point this year.
Nvidia invests into APLD
Applied Digital’s shares surged amid a high volume environment. Yahoo Finance data shows that volume on Monday was 52 million shares, a sharp increase from the average of 9,38 million.
The stock was also one of the most popular names on social media platforms such as X and StockTwits.
This rally took place after the company raised funding of $160 million, mainly from Nvidia, one of the most popular names in the semiconductor industry. It also received funding from Related Industries, one of the leading players in the real estate sector.
This investment is noteworthy because Nvidia plays a major role in the tech industry, where they manufacture the most advanced GPUs. The AI trend has helped the company become the third largest firm in the world over the last few years.
Nvidia has made investments in AI companies in the recent past. It invested in SoundHound AI early this year, which pushed its stock to a peak of $10.26. Since then, the stock price has fallen by over 55%, to $4.50.
Applied Digital is growing
Applied Digital, a technology firm that operates data centers, is a good place to start. The company focused initially on Bitcoin mining, an industry with high risks and high rewards. In 2022, it changed its business strategy and left the mining industry.
Now, Applied Digital offers data center solutions to companies that are in the Bitcoin mining business. These companies rent space in their data centers. It has seven large Bitcoin mining companies that account for 83% of the company’s total revenue.
Applied Digital has now also entered the cloud computing industry. The division, which will be launched in 2023, provides cloud services for companies, including AI and Machine Learning developers. It does this by providing GPU computing to help them handle large workloads. It has more than 6,200 GPUs, mostly from Nvidia.
It is a large industry that will continue to grow as the demand for AI solutions increases. It also offers HPC Hosting, where it builds AI data centers.
Strong Quarterly Results
The latest financial results of Applied Digital showed mixed results. It generated revenues of over $43.7 millions, which is higher than the $8.5 million that it made in 2022.
The adjusted EBITDA was $4.8 million. Its infrastructure upgrades were the highlight of the quarter as it continues to expand its business. It also resolved transformer problems at its Ellendale Data Center hosting facility and restored the facility to full capacity.
Applied Digital earned over $165.6 millions in the past year, a huge increase from the $55.5million it earned in 2023. The company suffered a huge net loss of $149 millions, as expected.
Analysts are optimistic regarding Applied Digital’s future growth. Analysts predict that Applied Digital’s revenue will be $53.8 million in fiscal first quarter, compared to $259 million by 2025 and $402 million the following year. This shows that the company is on track to grow at a rapid rate.
Analysts at Needham Securities, Roth MKM Securities, B. Riley Securities and HC Wainwright all have a buy recommendation. Analysts have a target average of $9, which is much higher than current levels of $6.58.
Investing in Applied Digital is not without risk. The company is dependent on a small number of customers in the Bitcoin-mining industry. The loss of even one of these customers could result in substantial losses.
Second, Nvidia’s investment does not guarantee future success. SoundHound is a good example, as its stock hasn’t done well since Nvidia bought it a few month ago.
Third, the AI sector may become cyclical, as we have seen with other industries such as electric vehicles, marijuana, and 3D printers.
Applied Digital Stock Price Analysis
The daily chart shows the APLD price bottomed out at $2.37 back in May, and has since risen by over 178%. It is now at its highest level since July. It has jumped over the 50-day and200-day Exponential moving averages (EMA), indicating more retail and institutional demand.
The stock is also above the upper edge of the ascending channel, and is close to the critical resistance point of $7.22 – its highest point since June. Also, the Relative Strength Index has been pointing upwards and is close to the overbought level.
As the Nvidia news fades, I expect the stock to rise to $7.22 before continuing its downward trend.
This post Very Good news for Applied Digital Stock (APLD); but risks remain may be updated as updates unfold
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