Earnings Miss: Applied Digital Corporation Missed EPS And Analysts Are Revising Their Forecasts

One of the biggest stories of last week was how Applied Digital Corporation (NASDAQ:APLD) shares plunged 34% in the week since its latest second-quarter results, closing yesterday at US$4.93. It was a pretty bad result overall, with revenues coming in 24% lower than the analysts predicted. Unsurprisingly, the statutory profit the analysts had been forecasting evaporated, turning into a loss of US$0.10 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Applied Digital after the latest results.

View our latest analysis for Applied Digital

Taking into account the latest results, the most recent consensus for Applied Digital from six analysts is for revenues of US$246.0m in 2024. If met, it would imply a huge 115% increase on its revenue over the past 12 months. Per-share statutory losses are expected to explode, reaching US$0.058 per share. Before this earnings report, the analysts had been forecasting revenues of US$349.5m and earnings per share (EPS) of US$0.29 in 2024. There looks to have been a major change in sentiment regarding Applied Digital's prospects following the latest results, with a large cut to revenues and the analysts now forecasting a loss instead of a profit.

There was no major change to the consensus price target of US$14.71, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Applied Digital analyst has a price target of US$19.00 per share, while the most pessimistic values it at US$12.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of Applied Digital'shistorical trends, as the 4x annualised revenue growth to the end of 2024 is roughly in line with the 312% annual growth over the past year. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 10% annually. So it's pretty clear that Applied Digital is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing to take away is that the analysts are expecting Applied Digital to become unprofitable next year. They also downgraded Applied Digital's revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. The consensus price target held steady at US$14.71, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Applied Digital. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Applied Digital going out to 2026, and you can see them free on our platform here..

It is also worth noting that we have found 4 warning signs for Applied Digital (1 is significant!) that you need to take into consideration.

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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.