Applied Digital Q4 Surprise Could Spark Multi-Year Breakout

Applied Digital Corporation (NASDAQ:APLD) is a stock that the author has been bullish on, initiated as a strong buy in December and reiterated in April. The author believes that a Q4 surprise could spark a multi-year breakout for the stock. The core of the author's bullishness lies in the stock's potential to disrupt the $9 trillion digital identity market with its advanced technology and partnerships. The author sees significant upside for the stock in the coming years.

Applied Digital Corporation (NASDAQ: APLD) has seen a significant surge in its stock price, driven by a combination of strategic partnerships, financial maneuvering, and growing investor confidence. The company's stock price surged past $10.50, closing at $10.91, and further propelling to $11.27 in pre-market trading, marking a notable 8.45% gain for the day [2]. This upward trajectory is a stark contrast to the stock's performance earlier in the year, highlighting the transformative events that have reshaped sentiment.

The past three months have been particularly eventful for Applied Digital. On April 15th, the stock closed at a modest $3.44, doubling before May had complete. A range of positive developments, most notably the landmark long-term lease agreements with CoreWeave, a specialized cloud provider focused on AI and high-performance computing (HPC), have pushed the stock on [2]. The agreements commit Applied Digital to providing 250 megawatts (MW) of critical IT load for CoreWeave at its Ellendale, North Dakota data center campus. The projected revenue from these agreements is approximately $7 billion over the 15-year term, a figure that has undoubtedly captured the attention of investors [2].

In addition to these agreements, Applied Digital secured a $150 million convertible preferred equity facility on April 14, which will be used to accelerate the development of the Ellendale HPC data center campus [2]. This financial maneuver demonstrates strategic foresight, ensuring that Applied Digital has the resources necessary to meet its ambitious expansion plans.

The recent breakout is driven by a combination of strategic partnerships, financial maneuvering, and growing investor confidence in its long-term potential. While challenges remain, the company's focus on AI and HPC infrastructure, coupled with its recent agreements, positions it well, yet execution will need to be top notch if the stock is to move to the higher end of analysts' target range [2].

Analysts have noted that Applied Digital's stock has surged 17% recently, boosted by major lease agreements and potential cost savings [4]. The company remains unprofitable, grappling with cash flow issues due to depreciation and capital expenditures, but its strategic partnerships and innovative solutions have sparked investor interest. The current valuation seems stretched when considering its elevated price-to-sales and EV multiples, and while analyst sentiment is generally favorable, the prevailing outlook is cautious with many suggesting a "hold" [4].

Despite strong revenue growth and considerable infrastructure investment, the company remains unprofitable, grappling with cash flow issues due to depreciation and capital expenditures. The current valuation seems stretched when considering its elevated price-to-sales and EV multiples. While analyst sentiment is generally favorable, with average targets ranging from $14 to $15, the prevailing outlook is cautious as many analysts suggest a "hold" [4].

Investors should carefully monitor execution in the coming quarters to gauge long-term viability, as the upcoming months present both opportunities and challenges for Applied Digital. The firm’s recent lease and partnerships could lead to strategic advancements and revenue growth, but the ongoing pressure from cash burn and unprofitability casts a shadow [4].

For retail investors looking at APLD stock, framing the trade revolves around balancing the excitement of a rising small-cap in the AI space with the reality of execution risks. Consider investing while being aware of the company’s financial backdrop and revenue growth trajectory. How long can the rapid expansion continue without profitability? Keep an eye on those burn metrics and operational updates to navigate this dynamic market [4].

References:
[1] https://www.instagram.com/p/DMDGFAgsc_B/
[2] https://www.asktraders.com/analysis/applied-digital-stock-price-apld-surges-past-recent-resistance/
[3] https://www.faegredrinker.com/en/services/experience/2025/6/northland-capital-markets-coleads-a-$200m-atthemarket-offering-for-applied-digital-corporation
[4] https://www.valuethemarkets.com/analysis/applied-digital-stock-apld-growth-potential-amid-risks