Applied Digital is sitting on “digital infrastructure gold”, Roth says

Roth MKM analyst Darren Aftahi has raised his price target on Applied Digital (Applied Digital Stock Quote, Chart, News, Analysts, Financials NASDAQ:APLD).

The analyst says in light of increased demand from High Performance Computing and AI, APLD is looking attractive.

“With increased interest in energy infrastructure/power assets for HPC/AI and the run-up in related stocks with useable power assets, we believe APLD remains an overlooked and underappreciated story by the investment community,” Aftahi wrote. “Simply put, while LOI to definitive and project financing remain hurdles to revaluation, we believe it is a function of when, not if, this becomes a reality. APLD remains our top pick, for its 400MW site in ND, with options to expand.”

In a research update to clients June 24, Aftahi maintained his “Buy” rating on APLD and raised his price target on the stock from $8.00 to $11.00.

The analyst thinks APLD will post an EBITDA loss of $2.9-million on revenue of $145.9-million in fiscal 2024. He expects those numbers will be an EBITDA loss of $9.3-million on a topline of $228.3-million in fiscal 2025.

Aftahi says APLD is sitting on “digital infrastructure gold”.

“On the tailwinds of Core Scientific’s (CORZ-NC) 12-year, 200MW HPC hosting agreement with CoreWeave, valued at ~$3.5B in total lifetime revenue and ~65% EBIT margins, digital data center infrastructure stocks have rallied,” the analyst noted. “We believe investors have begun to realize the long-term potential of these names and how valuable ownership and power access is with the growing demand for data centers and power to facilitate AI and HPC initiatives for companies large and small. After the CORZ deal, other digital infrastructure stocks that have announced or foreshadowed expansion or re-allocation of digital data center resources away from BTC toward HPC/AI have rallied significantly. That said, we believe APLD has been underappreciated by investors, despite having ~400MW of potential HPC capacity and another ~280MW it could potentially retrofit away from BTC hosting long term or expand via new builds. APLD owns valuable power assets and capacity that will only become more valuable as the demand/supply imbalance for DCs and power to run those skews toward suppliers. We believe its two ND sites also have the ability to expand beyond 680MW. Over the last several months, our conversations amongst participants in the data center and power space suggest that largescale power assets to run large-scale data centers are becoming harder to come by. We also note, APLD was much earlier to this space than many of its BTC miner peers, who are now pivoting/diversifying.”