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Shares of Applied Digital (NASDAQ:APLD) surged about 34% on Thursday after fourth quarter results beat estimates and it provided an operational update.
Applied Digital said that partner CoreWeave (NASDAQ:CRWV) exercised a lease option for an additional 150 MW. When the new lease is signed, it will bring the total contracted revenue from the leases to $11B. The third lease agreement, which is currently being finalized, is expected to have substantially the same terms as the two existing leases.
Citizens kept its Market Outperform rating and $18 price target on Applied Digital’s stock.
Analysts led by Greg Miller said that Applied Digital reported results, and while essentially in line with expectations, it included the announcement that CoreWeave has exercised its option to the remaining 150 MW of capacity currently under construction in North Ellendale.
The analysts added that the announcement confirmed their prediction that CoreWeave would consume the entire facility, effectively allowing Applied to now focus on the remaining 600 MW of capacity to be developed.
“Should the company be successful at selling all of its capacity (1GW in North Ellendale and 1GW pipeline), we believe the stock could hypothetically be worth $45.00 per share,” said Miller and his team.
Needham kept its Buy rating on Applied Digital and raised the price target on the stock to $16 from $12.
Analysts led by John Todaro said Applied Digital posted a narrow miss on Adjusted EBITDA as mining hosting margins came in softer than expected and General and Administrative, or G&A, outpaced Needham’s estimate as the company added headcount to support growth plans.
However, the analysts added that they were impressed with the pipeline of opportunities for high-performance computing, or HPC.
The analysts noted that Applied Digital increased its contracted capacity with CoreWeave to 400MW; and the company is in “advanced talks” with a major investment-grade hyperscaler on additional capacity.
“While we have heard those comments in the past, we believe IG hyperscalers may find increased comfort with APLD now as the company delivers on its contracts with CRWV,” said Todaro and his team.