Assessing Applied Digital (APLD) Valuation After Nvidia Exit And US$2.15b Debt Offering

Nvidia’s decision to fully exit its position in Applied Digital (APLD) has put fresh attention on the stock, just as the company takes on US$2.15b in new senior secured notes.

See our latest analysis for Applied Digital.

The stock’s recent pullback, with a 1-day share price return of negative 6.37% and a 30-day share price return of negative 22.82%, appears tied to Nvidia’s exit and news of the US$2.15b notes offering. However, the 1-year total shareholder return of 277.89% and very large 5-year total shareholder return suggest longer term momentum has been strong even as shorter term sentiment cools.

If Nvidia’s exit has you rethinking where AI-related opportunities might be, it could be worth scanning our list of 34 AI infrastructure stocks as another way to spot potential candidates in this space.

With Applied Digital carrying US$2.15b in new debt plans, a recent pullback, rapid revenue and net income growth, and a large discount to analyst targets, is there still a buying opportunity here, or is future growth already priced in?

Most Popular Narrative: 7.6% Overvalued

Compared to Applied Digital’s last close at $26.15, the most followed narrative sets fair value at $24.30, implying the current price sits above that mark.

APLD is currently walking a financial tightrope. While revenue is skyrocketing, the company is still reporting net losses ($31.2 million in the most recent quarter) due to the massive capital expenditures required to build these facilities. The market is currently grappling with "execution risk"; if there are delays in power interconnection or if the planned spin-out of their cloud business into "ChronoScale" faces regulatory hurdles, the stock’s high-growth premium could evaporate.

Read the complete narrative.

Curious how this builder of AI factories arrives at that fair value floor? The narrative leans on aggressive revenue build out, margin expansion and a specific cash flow ramp. The full story connects those assumptions directly to the $24.30 number.

Result: Fair Value of $24.30 (OVERVALUED)

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

However, this story still hinges on flawless execution with high leverage, and any delays at Polaris or Delta Forge could quickly challenge that fair value floor.

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

Next Steps

With mixed signals on valuation, sentiment and leverage, it makes sense to look at the full picture quickly and shape your own view, starting with 1 key reward and 3 important warning signs.

Looking for more investment ideas?

If you stop with one stock, you risk missing other compelling setups, so keep your watchlist growing with a few focused, data driven starting points.

• Target quality at a discount by checking out our 49 high quality undervalued stocks that currently score well on both fundamentals and pricing.
• Prioritise resilience first and see which companies make the cut in our 75 resilient stocks with low risk scores, built around lower risk profiles.
• Hunt for earlier stage potential by scanning the 32 elite penny stocks with strong financials that still show solid underlying financials.

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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