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Applied Digital (APLD): Evaluating Valuation After Multi-Billion-Dollar Data Center Deals and Earnings Beat

Simply Wall St · 10/17 22:28

Applied Digital (APLD) has been in the spotlight after reporting quarterly results that beat expectations and announcing new multi-billion-dollar partnerships. The company expanded major lease agreements and secured funding for future data center campuses as demand for AI infrastructure accelerates.

See our latest analysis for Applied Digital.

The past year has seen Applied Digital’s share price rocket higher, with a remarkable 338.97% year-to-date return as AI-driven demand for its data centers continues to attract high-profile partnerships and heavyweight investors. This incredible momentum is further echoed in its one-year total shareholder return of 318.58%, reinforcing a surge in both market confidence and growth potential as the company scales its operations with multi-billion-dollar contracts and new campus funding.

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But with such an extraordinary run, investors have to wonder: is Applied Digital’s valuation justified, or is Wall Street already factoring in all that future growth? Is this a genuine buying opportunity, or has the market priced in perfection?

Most Popular Narrative: 26.8% Overvalued

With a fair value set at $27 according to the most widely followed narrative, Applied Digital’s last close of $34.24 puts it squarely in premium territory. The gap underscores market optimism, but a closer look at the drivers behind this valuation reveals some bold assumptions about growth and earnings scalability.

The accelerating industry need for high-density, geographically distributed data centers to support AI and machine learning workloads places Applied Digital in a favorable position, capitalizing on digital transformation trends that are set to drive ongoing utilization growth, improved asset values, and ultimately earnings expansion over the next several years.

Read the complete narrative.

Want to know what’s fueling this sky-high valuation? The narrative hinges on bold projections about revenue, profit margins, and future market multiples. These are numbers that most companies only dream about. Curious which forecasts push the fair value far above industry standards? Click through to see exactly what’s behind this calculation.

Result: Fair Value of $27 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing cryptocurrency volatility and heavy debt loads mean that any stumble in demand or customer pipeline could quickly change the growth narrative.

Find out about the key risks to this Applied Digital narrative.

Build Your Own Applied Digital Narrative

If you want to dive into the numbers yourself or build a narrative that fits your own view, you can explore the data and lay out your perspective in just a few minutes. Do it your way

A great starting point for your Applied Digital research is our analysis highlighting 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.