What's Happening?
Applied Digital's stock is experiencing a surge following the release of its Q1 results, which exceeded expectations. Analysts have responded positively, with Citizens, led by Gregory Miller, maintaining a Buy rating and raising the price target from $35 to $40. The company's valuation is now primarily based on its data center leasing activity with AI-focused clients, including CoreWeave. Needham analyst John Todaro also increased his price target from $21 to $41, focusing on the Polaris Forge 2 site, where a lease deal with a major hyperscaler is anticipated. Applied Digital has signed another 150 MW lease with CoreWeave at Polaris Forge 1, with potential for significant scaling over the next few years.
Why It's Important?
The positive analyst ratings and increased price targets reflect strong confidence in Applied Digital's growth potential. The company's strategic focus on AI data center leasing positions it well to capitalize on the growing demand for AI infrastructure. The successful leasing activity and expansion plans indicate a robust revenue pipeline, which is crucial for funding future projects. Analysts believe that Applied Digital is entering a growth cycle where revenue from current projects will support new developments, enhancing its market position and investor appeal.
What's Next?
Applied Digital is in early talks with new hyperscalers at additional locations, indicating potential for further expansion. The company is also advancing construction at the Harwood site with financing from Macquarie. Analysts expect the Polaris Forge 2 site to secure a lease deal soon, contributing to the company's long-term capacity goals. These developments suggest continued growth and strategic expansion in the AI infrastructure sector, with Applied Digital poised to benefit from increasing demand and investor confidence.
