Applied Digital (APLD) is back in focus after signing a roughly US$7,500 million, 15-year lease with a new investment grade U.S. hyperscaler for 300 MW at its Delta Forge 1 AI campus.
See our latest analysis for Applied Digital.
The lease news comes after a sharp 41.8% 1 month share price return and a year to date share price gain of 19.85%. The 1 year total shareholder return is also very large, pointing to strong but volatile momentum.
If this kind of AI infrastructure story has your attention, it could be worth scanning other opportunities using our 38 AI infrastructure stocks
With revenue growth, ongoing net losses and a share price that has already moved sharply, the key question now is simple: is Applied Digital still undervalued, or is the market already pricing in years of future growth?
Most Popular Narrative: 33% Undervalued
With the most followed narrative pointing to a fair value of about $50 per share versus a last close of $33.69, the current price sits well below that estimate and puts the long lease announcements into sharper context.
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, representing 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.
Want the full story behind that fair value gap? The narrative leans heavily on rapid top line expansion, a sharp margin shift and a rich future earnings multiple. The exact mix of those moving parts may surprise you.
Result: Fair Value of $50.09 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this hinges on heavy debt-funded growth and a small set of large counterparties, so any contract hiccups or utilization shortfall could quickly challenge that thesis.
Find out about the key risks to this Applied Digital narrative.
Another Way to Look at Valuation
The fair value narrative says APLD looks about 33% undervalued around $33.69, but the current P/S ratio of 30.2x tells a very different story. That is far above the fair ratio of 17.3x, the US IT industry at 1.8x, and peers at 5.9x; this points to meaningful valuation risk if expectations cool.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
Given the mix of enthusiasm and caution in this story, it makes sense to move quickly and check the numbers for yourself before opinions harden. To see how the current optimism stacks up against the concerns in one place, review the 1 key reward and 4 important warning signs.
Looking for more investment ideas?
If you are serious about building a stronger portfolio, do not stop with a single AI name. Use powerful screeners to spot ideas other investors might overlook.
- Target higher potential in smaller names by checking out 24 elite penny stocks with strong financials that already show stronger financial footing than most.
- Focus on quality at a sensible price by running through the 53 high quality undervalued stocks before enthusiasm pushes valuations further from fundamentals.
- Prioritise resilience and sleep better at night by using the 73 resilient stocks with low risk scores to find companies with sturdier profiles.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com