Applied Digital (APLD) Could Be 60% Undervalued After Its $7b CoreWeave Leases

Applied Digital (APLD) has switched on Phase 1 of Building 2 at its Polaris Forge 1 campus, adding 75 MW of AI capacity under 15 year CoreWeave leases tied to US$7 billion in contracted revenue.

See our latest analysis for Applied Digital.

Despite the new AI capacity at Polaris Forge 1 and long term CoreWeave leases, Applied Digital’s recent 30 day share price return is down 37.53%, even as its 1 year total shareholder return is 188.57%. This suggests longer term momentum remains stronger than the latest pullback.

If you are looking beyond Applied Digital to other AI infrastructure opportunities, now could be a good time to check out 52 AI infrastructure stocks

Applied Digital now sits between long term AI contracts and a sharp recent pullback. The key question is whether this reset has cleared space for more upside or already reflected most of the good news in the stock.

Most Popular Narrative: 60.4% Undervalued

Applied Digital closed at $29.03, while the most followed narrative anchors fair value at $73.36, highlighting a substantial gap between market price and modeled value.

The analysts have a consensus price target of $73.36 for Applied Digital based on their expectations of its future earnings growth, profit margins and other risk factors.

In order for you to agree with the analysts, you would need to believe that by 2029, revenues will be $2.4 billion, earnings will be $117.0 million, and it would be trading on a PE ratio of 288.4x, assuming you use a discount rate of 9.5%.

Read the complete narrative.

Want to see what underpins that bold fair value for Applied Digital? The narrative relies on rapid revenue expansion, a profit swing, and a rich future earnings multiple. Curious which assumptions really carry the model and how much growth is incorporated into the outlook?

Result: Fair Value of $73.36 (UNDERVALUED)

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

However, Applied Digital still faces concentration on a handful of hyperscaler customers, along with a debt funded buildout that could pressure cash flows if projects slip or demand softens.

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

Another View: What Applied Digital’s Sales Multiple Is Signalling

The fair value narrative for Applied Digital points to upside, but the current P/S ratio of about 26x tells a tougher story. That is far above the US IT industry at 1.9x, above peers at 5.9x, and even ahead of the 24.3x fair ratio that the market could move toward over time. For investors, that gap raises a simple question: is this a margin of safety or a lot of expectation already in the price?

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

With sentiment clearly mixed around Applied Digital, this may be a good time to move quickly, review the data, and decide where you stand on its story, starting with 1 key reward and 4 important warning signs

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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.

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