Applied Digital (APLD): Exploring Valuation After Recent Share Price Rally

Applied Digital (APLD) has drawn interest lately as its stock has seen big swings over the past month, gaining over 10%. Investors are watching closely to see if this momentum will continue.

See our latest analysis for Applied Digital.

Despite some recent swings, Applied Digital’s 30-day share price return of nearly 11% is part of a remarkable year-to-date rally of over 297%. Momentum has clearly been building, with the company delivering a total shareholder return of more than 1,200% over the past three years and an astonishing 46,400% over five years. This signals that growth-minded investors have been rewarded for sticking around.

If rapid moves like APLD’s have you wondering what else is gaining momentum, this is a great moment to broaden your scope and discover fast growing stocks with high insider ownership

But after such a dramatic surge, could Applied Digital’s current valuation still leave room for further gains? Or have investors already accounted for all the company’s future prospects in the current share price?

Most Popular Narrative: 29.1% Undervalued

Applied Digital’s most followed narrative indicates that its fair value sits well above the last closing price of $30.98. This suggests significant upside potential. The market seems to be grappling with bold growth assumptions, and the narrative presents a view powered by big-ticket contracts and ambitious expansion plans.

The company has recently secured long-term (15-year) leasing agreements with CoreWeave, a major AI hyperscaler, for its purpose-built AI/HPC data center campus, Polaris Forge 1. This represents a total of $7 billion in contracted revenue and a multi-year, recurring, and predictable revenue stream that directly supports future revenue growth and cash flow stability.

Read the complete narrative.

Want to know the growth blueprint behind this high valuation? The key element of this narrative is record-breaking earnings and a future profit multiple usually associated with tech leaders. Interested in which bold financial projections support that price target? Dive deeper to see the surprising numbers that drive this fair value calculation.

Result: Fair Value of $43.70 (UNDERVALUED)

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

However, ongoing customer concentration and volatility in crypto-related revenues could challenge Applied Digital’s bullish outlook if these risks materialize.

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

Another View: Take Caution with High Sales Ratio

Looking at Applied Digital from a different perspective, the company's price-to-sales ratio stands at a substantial 49.9x. This is much higher than its peers at 4.2x and the US IT industry average of 2.5x. The fair ratio, where the market might eventually settle, is estimated at 21.2x. This substantial gap suggests that the current share price could be outpacing the company's underlying financials, adding a real risk if market expectations cool. Could this momentum continue, or is a correction likely?

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

Build Your Own Applied Digital Narrative

If these perspectives do not fit your outlook or you want to take control of the story, you can build a unique view in under three minutes. Do it your way

A great starting point for your Applied Digital research is our analysis highlighting 2 key rewards and 3 important warning signs 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.

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