APLD Stock Forecast & Price Target

Applied Digital Corp is experiencing a significant revenue increase, driven by a 39% rise in High-Performance Computing (HPC) revenues, which has been reported at $763 million, surpassing prior estimates. The company is benefiting from improved supply conditions due to facility expansion, easing labor issues, and increased BTC hosting revenue, which is approximately 10% higher thanks to favorable power pricing. Furthermore, with ongoing investments in the HPC build-out and successful launch of the first PF1 data hall ahead of schedule, Applied Digital is positioned for strong near-term revenue growth and maintains a robust pipeline, including potential agreements with major hyperscalers.

Applied Digital Corp's gross margins fell significantly short of projections, registering at 13% compared to an anticipated 19%, primarily due to elevated fit-out costs. The company's reliance on a limited customer base raises concerns of revenue concentration risk, particularly given macroeconomic headwinds, geopolitical risks, and increased competition from lower-cost independent hosters. Additionally, the impending bitcoin halving in Q2 2024 is expected to negatively affect margins for its BTC mining customers, further complicating operational viability and profitability going forward.