Applied Digital Corporation
APLDApplied Digital is a company that provides specialized data center services in the computing infrastructure sector.
It focuses on offering high-performance computing solutions, particularly for applications like artificial intelligence and blockchain technology, positioning itself as a niche infrastructure operator for emerging digital workloads.
Updated: February 19, 2026, 16:00 EST
Investment Opinion: Should I buy APLD Today?
Analysis of Applied Digital Corporation (APLD)
Technical Perspective APLD shows impressive medium-term momentum with a 37% surge over three months, significantly outperforming the market. However, the stock is currently near its 52-week high and exhibits extreme volatility (beta of 7.2), indicating it is technically overbought and poses elevated near-term risk despite recent strength.
Fundamental Health Revenue growth is robust, doubling sequentially to $126.6 million in Q2, but the company remains unprofitable with negative net income and operational cash flow. High leverage (debt-equity ratio of 1.80) and poor returns on assets/equity highlight significant inefficiencies and financial strain.
Valuation & Risk Considerations Valuation metrics are not meaningful due to negative earnings, while the high price-to-book ratio of 6.15 suggests the market is pricing in future growth potential. Extreme volatility and a history of deep drawdowns (-67.7%) underscore substantial risk, requiring a high tolerance for price swings.
Investment Recommendation APLD is a high-risk, high-potential stock suited only for speculative investors. While revenue growth is compelling, the lack of profitability, high debt, and extreme volatility caution against investment for most portfolios. Investors should wait for sustained profitability improvements or a significant pullback to consider entry.
APLD 12-Month Price Forecast
RockFlow Model Forecast: Three Scenarios for 2026
Based on the analysis, here is a 12-month outlook for Applied Digital Corporation (APLD):
12-Month Outlook for APLD
The primary catalysts for APLD will be its ability to sustain its impressive sequential revenue growth and demonstrate a credible path toward profitability, as the market is currently valuing it on future potential. However, significant risks dominate the outlook, including its extreme volatility (beta of 7.2), high financial leverage, persistent lack of profitability, and operational cash burn, making it highly susceptible to a deep drawdown if growth falters or market sentiment sours. Given the absence of a formal analyst target price and the stock's technically overbought position near 52-week highs, a target range is speculative; a prudent approach would be to wait for a significant pullback to the low-$20s for a more favorable risk/reward entry, contingent on signs of improving fundamental health.
Wall Street Consensus
Most Wall Street analysts are optimistic about Applied Digital Corporation's 12-month outlook, with consensus target around $31.53, indicating expected upside potential.
Bulls vs Bears: APLD Investment Factors
Overall, APLD has investment potential but also faces challenges. Here are key factors to weigh before investing.
Bullish
- Buying Opportunity Potential: Recent sell-off may present an attractive entry point for investors.
- AI-First Data Center Focus: Company specializes in high-growth AI infrastructure and computing services.
- Attractive Valuation After Drop: Sharp price decline could make stock undervalued relative to prospects.
Bearish
- NVIDIA Stake Elimination: NVIDIA completely exited its $177 million position in the company.
- Significant Price Decline: Stock dropped over 8% following NVIDIA's stake reduction news.
- Investor Confidence Erosion: Major investor exit raises concerns about company's future prospects.
- After-Hours Selling Pressure: Extended trading sessions show continued negative momentum.
APLD Technical Analysis
APLD has demonstrated volatile but substantially positive long-term performance despite recent weakness.
The stock declined 11% over the past month but has surged 37% over three months, significantly outperforming the market by nearly 35 percentage points during that period, reflecting strong recent momentum despite short-term pullbacks.
Currently trading near the upper end of its 52-week range, APLD appears technically overbought given its extreme volatility (beta of 7.2) and proximity to recent highs, suggesting elevated risk despite the strong medium-term performance.
| Period | APLD Return | S&P 500 |
|---|---|---|
| 1m | -11.1% | +1.0% |
| 3m | +36.7% | +1.9% |
| 6m | +110.6% | +6.5% |
| 1y | +209.7% | +12.1% |
| ytd | +12.2% | +0.2% |
APLD Fundamental Analysis
Revenue & Profitability: APLD demonstrated strong sequential revenue growth, increasing from $64.2 million in Q1 to $126.6 million in Q2. However, profitability remains deeply negative, with a gross profit ratio improving to 20.6% but an operating income ratio of -24.5% and net income ratio of -13.8%, indicating significant operating inefficiencies relative to revenue scale.
Financial Health: The company maintains adequate short-term liquidity with a current ratio of 4.82, supported by substantial cash reserves. However, the debt-equity ratio of 1.80 reflects a highly leveraged capital structure, while a negative interest coverage ratio of -2.70 and negative cash flow to debt ratio indicate strained debt servicing capacity from current operations.
Operational Efficiency: Operational metrics show considerable challenges, with negative returns on assets (-0.33%) and equity (-1.21%) reflecting poor capital allocation effectiveness. The asset turnover of 0.024 suggests inefficient utilization of the asset base to generate revenue, while the negative cash flow per share of -$0.06 reinforces operational cash burn.
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Level: APLD exhibits negative valuation metrics across all meaningful measures, with negative TTM and forward P/E ratios along with a deeply negative EV/EBITDA. These figures indicate the company is currently unprofitable and therefore cannot be assessed through conventional earnings-based valuation metrics. The elevated PB ratio of 6.15 suggests the market is valuing the company significantly above its tangible asset base despite the absence of profitability.
Peer Comparison: Without industry average data available for direct comparison, APLD's valuation metrics must be evaluated in isolation. The consistently negative earnings multiples combined with the high price-to-book ratio present a concerning valuation picture that would typically indicate substantial execution risk. The lack of profitability metrics makes relative valuation assessment impossible without comparable industry benchmark data.
Investment Risk Disclosure
Volatility Risk: The stock exhibits exceptionally high volatility risk, as evidenced by an extremely elevated Beta of 7.182, indicating it is over seven times more volatile than the broader market. This extreme sensitivity to market movements is corroborated by a severe 1-year maximum drawdown of -67.7%, highlighting the potential for substantial capital erosion during downturns. Investors must be prepared for significant price swings.
Other Risks: While the absence of short interest suggests that professional traders are not actively betting on a price decline, it does not inherently signal a low-risk profile. The primary concern in this category may be liquidity risk, as the lack of a significant short position could coincide with lower trading volumes, potentially leading to wider bid-ask spreads and difficulty in executing larger trades without impacting the price.
FAQs
Neutral to Bearish - While APLD operates in the high-growth AI infrastructure sector and has strong analyst support, its current risk profile is exceptionally high. Key concerns include extreme stock volatility (beta over 7), persistent unprofitability despite revenue growth, and NVIDIA's complete exit from its position. This stock is suitable only for speculative investors with very high risk tolerance who can withstand potential severe price swings.
Based on the metrics provided, APLD stock is overvalued. The company has no positive earnings (evidenced by negative trailing and forward P/E ratios), yet it trades at a high Price-to-Book ratio of 6.15 and an extremely elevated Price-to-Sales ratio of 42.4. These valuation levels are excessive, even for a growth company, because they are not supported by current profitability or operational efficiency, as shown by negative returns on assets and equity. The market appears to be pricing in flawless future execution and rapid profitability improvement, which presents significant risk given the company's current high leverage and operational cash burn.
Based on the provided information, here are the key risks of holding APLD stock, ordered by importance:
1. Financial Risk: The company's high debt-to-equity ratio of 1.80, combined with negative cash flow and a negative interest coverage ratio, indicates a severely strained ability to service its debt from ongoing operations. 2. Business Risk: Despite generating revenue, the company is deeply unprofitable with a net income ratio of -13.8% and negative operational cash flow, reflecting fundamental operational inefficiencies and a lack of a sustainable business model. 3. Market (Volatility) Risk: The stock's extreme beta of 7.2 means its price is highly sensitive to broad market movements, exposing investors to the potential for severe losses, as evidenced by its 67.7% maximum drawdown.
Based on the provided fundamental analysis, here is a performance forecast for Applied Digital Corporation (APLD) through 2026.
My forecast envisions a base case target price of $18-$25 by 2026, contingent on the company successfully stabilizing its operations. A bull case of $40+ is plausible only if APLD achieves sustained, profitable scaling while significantly reducing its financial leverage. The key growth drivers are its demonstrated sequential revenue growth, the potential for improved operational efficiency as its data center business matures, and strong underlying demand for AI and computing infrastructure. The primary assumptions are that management will execute a credible path to profitability and that market conditions for its services remain favorable. This forecast is highly uncertain, as the stock's extreme volatility, persistent cash burn, and high leverage present substantial risks that could lead to significant downside if execution falters.