Strategic Lease Agreement Boosts Applied Digital’s Growth Prospects and Financial Stability

Needham analyst John Todaro maintained a Buy rating on Applied Digital Corporation (APLD – Research Report) today and set a price target of $10.00.

John Todaro has given his Buy rating due to a combination of factors surrounding Applied Digital Corporation’s recent strategic moves. The company has secured a significant 250MW lease agreement with CoreWeave for its Ellendale site, which is anticipated to generate substantial revenue and demonstrate the site’s capability to major hyperscalers like OpenAI, Google, and Microsoft. This deal not only brings in cash flow but also positions APLD favorably with potential high-profile clients.
The financial terms of the lease are promising, with revenues starting at $360 million and expected to grow annually. The net operating income margin is projected to be between 88-90%, contributing to an attractive yield. Despite not fulfilling previous contract obligations with Macquarie, there is potential for Macquarie’s involvement in some capacity. APLD’s plan to seek financing soon, targeting a 70% loan-to-value ratio, further supports the positive outlook for the company’s growth and financial stability.