Digital infrastructure firm Applied Digital (APLD) is set to report earnings on January 7, after the market closes. Analysts are expecting earnings per share to come in at -$0.11 on revenue of $86.66 million. This compares to last year’s figures of -$0.06 and $63.87 million, respectively. Interestingly, several Wall Street firms are increasingly optimistic about the company’s outlook.
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To begin with, Northland, led by four-star analyst Michael Grondahl, has named Applied Digital as its top pick for next year by arguing that the company is well-positioned to outperform peers as demand for power from hyperscalers continues to rise. The firm also highlighted Applied Digital’s ability to execute projects on schedule, its large pipeline of power assets, and its longer-term plan to operate under a REIT-style model. As a result, Northland maintains a Buy rating with a $40 price target.
Cloud Computing Unit Spinoff
Separately, Citizens’ Gregory Miller is similarly bullish, with a Buy rating and a $40 price target after Applied Digital announced a non-binding term sheet to spin off its cloud computing unit, Applied Digital Cloud. That business would be combined with Ekso Bionics Holdings (EKSO) to form a new entity and shift Applied Digital’s focus toward high-performance computing data center development. According to Citizens, this structure allows the company to improve equity returns in its core colocation business, while still benefiting from the growing demand for compute infrastructure through a separate platform.
Lake Street also sees meaningful upside from the proposed transaction. Five-star analyst Rob Brown said that the planned spinoff of the cloud GPU business could unlock significant value. Indeed, he noted that similar public and private companies carry multi-billion-dollar valuations. Moreover, he pointed out that this segment, which operates six GPU clusters and generates about $75 million in annual revenue, has been largely overlooked within Applied Digital. As a standalone business, Brown expects the cloud business to grow faster, leading Lake Street to assign a Buy rating and a $45 price target.
What Do Options Traders Anticipate?
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. Currently, the at-the-money straddle suggests that options traders expect a 14.5% price move in either direction.
Is APLD Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on APLD stock based on 10 Buys assigned in the past three months, as indicated by the graphic below. Furthermore, the average APLD price target of $43.67 per share implies 44.3% upside potential.
