On Friday, B.Riley raised the price target for Applied Blockchain Inc (NASDAQ:APLD) to $8.00 from $6.00, while maintaining a "Buy" rating. The firm's analysis highlighted the company's ongoing development of its first 100 megawatt (MW) facility in Ellendale and the potential conversion of a letter of intent (LOI) for 400 MW with a U.S.-based hyperscaler into a firm contract. The expectation set by management is that this could occur in July, with comprehensive financing anticipated to follow soon after.
Management referenced a loan-to-cost ratio of 90% and noted a decrease in capital costs during negotiations, particularly as Applied Blockchain transitioned from its previous counterparty to a hyperscaler. The company anticipates a realistic rate around the Secured Overnight Financing Rate (SOFR) plus 250 basis points.
Despite the cost of building being approximately $10 million per MW, largely due to added redundancy, Applied Blockchain has worked with NVIDIA (NASDAQ:NVDA)'s design group to ensure data center latency is optimized.
Applied Blockchain also discussed its strategic position in North Dakota, where it has visibility to 850-900 MW and over 2 gigawatts (GW) across its entire portfolio, with the potential for these projects to be operational between 2024 and 2026. The company maintains that digital mining facilities are not ideal for high-performance computing (HPC) applications.
The analyst firm believes that Applied Blockchain's early market entry and the impending execution of the LOI are significant catalysts for the company. Consequently, the price target has been adjusted to reflect the projected operational ramp-up of the initial 100 MW at Ellendale.
In other recent news, Applied Digital Corporation reported significant financial strides, despite a net loss of $62.8 million and revenues of $43.3 million for the fiscal third quarter. The company secured a $125 million financing commitment from CIM Group for its High-Performance Computing (HPC) Campus in Ellendale, North Dakota, which could potentially increase to $200 million upon mutual agreement.
Additionally, the company issued a $42.1 million convertible debenture in a private financing agreement and a warrant for the purchase of up to 6.3 million shares as part of a financing agreement with CIM APLD Lender Holdings, LLC.
Roth/MKM maintained its Buy rating on Applied Digital and raised its price target from $8.00 to $11.00, highlighting the company's potential in high-performance computing (HPC) and artificial intelligence (AI). Needham also maintained its Buy rating on Applied Digital, endorsing the company as a top pick for AI/HPC infrastructure. Both firms emphasized Applied Digital's operational advantages and the potential of its 400MW site in North Dakota.
In other company news, Todd Gale was appointed as the new Chief Development Officer, while Ella Benson was added as an independent director to the company's Board of Directors.
InvestingPro Insights
InvestingPro data accentuates the dynamic landscape surrounding Applied Blockchain Inc (NASDAQ:APLD), with a notable market capitalization of $867.8 million. The company's striking revenue growth over the last twelve months, reported at 252.07%, underlines its rapid expansion in the data center and blockchain space. Moreover, the significant returns over the past week and month, at 13.04% and 35.06% respectively, reflect the positive market reception to recent developments and the company's strategic moves.
However, potential investors should be aware of the high volatility in Applied Blockchain's stock price, as indicated by the InvestingPro Tips. This volatility is coupled with the company's current negative P/E ratio of -6.03, which may raise concerns about profitability in the short term. Additionally, with analysts not expecting the company to be profitable this year, investors should consider the long-term growth prospects against the immediate financial metrics.
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