Applied Digital (NASDAQ:APLD) Shares Gap Down - Should You Sell?

Key Points

• Applied Digital shares gapped down from $23.25 to $22.13 and later traded near $21.68, reflecting investor concern despite strong reported revenue growth.
• The company reported sharply higher revenue and approximately $36 billion in contracted revenue, with plans to add more than 600 megawatts of capacity; Finland’s favorable power and permitting environment could support its AI data-center expansion.
• Key risks include a $237.1 million GAAP net loss, reduced earnings forecasts, heavy debt and substantial construction-financing needs. Analysts remain broadly positive with a “Moderate Buy” consensus, but price targets and ratings vary widely.

Applied Digital Corporation (NASDAQ:APLD - Get Free Report)'s share price gapped down before the market opened on Tuesday. The stock had previously closed at $23.25, but opened at $22.13. Applied Digital shares last traded at $21.6840, with a volume of 6,031,756 shares changing hands.

Key Stories Impacting Applied Digital

Here are the key news stories impacting Applied Digital this week:

• Positive Sentiment: Applied Digital reported approximately $341.9 million in fiscal first-quarter 2027 revenue, up 322% year over year, and says it has about $36 billion in contracted revenue. The company also plans to bring more than 600 megawatts of capacity online over the next 12 months, supporting its long-term AI data-center growth story. Applied Digital Wants to Add 600 Megawatts in a Year. Can It Pay for It?
• Positive Sentiment: The company’s planned Finland expansion could benefit from relatively favorable power availability, grid stability and permitting conditions as hyperscalers seek additional locations for AI data centers. Google's $13 Billion Nordic Bet Points to a New Global Front in the AI Power Race
• Neutral Sentiment: Northland Securities retained an Outperform rating and an $82 price target, indicating significant potential upside if Applied Digital executes successfully. However, the firm lowered its FY2027 EPS forecast to a loss of $1.50 from a loss of $0.44, with quarterly loss estimates also reduced.
• Negative Sentiment: Although revenue growth was strong, Applied Digital posted a much wider GAAP net loss of $237.1 million. Investors are increasingly focused on whether the company can finance construction before tenants begin generating payments, particularly as it seeks to rapidly expand capacity. What Could Derail Applied Digital Stock?
• Negative Sentiment: Analyst estimate cuts reinforce concerns about persistent losses, while commentary also highlights Applied Digital’s heavy debt burden and the large capital requirements associated with its data-center buildout. The contrast between its sizable contract backlog and roughly $7 billion market value reflects execution and financing risk. Should Investors Hold or Fold APLD Stock After Its Q1 Earnings Miss?

Analyst Upgrades and Downgrades

Several research analysts have recently issued reports on the company. Morgan Stanley set a $41.00 target price on Applied Digital and gave the stock an "equal weight" rating in a research report on Friday. Zacks Research lowered Applied Digital from a "hold" rating to a "strong sell" rating in a research report on Wednesday, August 26th. Needham & Company LLC dropped their price target on Applied Digital from $83.00 to $70.00 and set a "buy" rating on the stock in a research report on Thursday, October 8th. Wall Street Zen cut Applied Digital from a "sell" rating to a "strong sell" rating in a research note on Sunday, August 30th. Finally, Rothschild & Co Redburn set a $22.00 price objective on Applied Digital and gave the stock a "neutral" rating in a report on Monday, September 21st. Three equities research analysts have rated the stock with a Strong Buy rating, twelve have assigned a Buy rating, two have assigned a Hold rating and two have assigned a Sell rating to the stock. According to data from MarketBeat.com, the stock has an average rating of "Moderate Buy" and an average target price of $62.25.

Applied Digital Stock Performance

The company has a debt-to-equity ratio of 3.90, a quick ratio of 2.56 and a current ratio of 2.56. The business's 50-day moving average is $26.87 and its 200-day moving average is $32.48. The company has a market capitalization of $6.62 billion, a PE ratio of -13.32 and a beta of 5.99.

Applied Digital (NASDAQ:APLD - Get Free Report) last announced its quarterly earnings data on Wednesday, October 7th. The company reported ($0.01) earnings per share for the quarter, topping analysts' consensus estimates of ($0.30) by $0.29. Applied Digital had a negative net margin of 51.28% and a negative return on equity of 27.21%. The business had revenue of $300.39 million for the quarter, compared to analysts' expectations of $116.29 million. During the same quarter in the prior year, the company earned ($0.03) earnings per share. The business's revenue was up 367.8% compared to the same quarter last year. On average, research analysts anticipate that Applied Digital Corporation will post -1.09 earnings per share for the current year.

Insider Activity

In other news, Director Richard Nottenburg sold 75,000 shares of the business's stock in a transaction that occurred on Tuesday, August 4th. The stock was sold at an average price of $31.15, for a total value of $2,336,250.00. Following the sale, the director directly owned 133,378 shares of the company's stock, valued at $4,154,724.70. The trade was a 35.99% decrease in their position. The sale was disclosed in a document filed with the SEC, which is available through the SEC website. Insiders own 9.50% of the company's stock.

Institutional Inflows and Outflows

A number of institutional investors and hedge funds have recently added to or reduced their stakes in APLD. Whitaker Myers Wealth Managers LTD. bought a new stake in shares of Applied Digital in the second quarter worth approximately $1,841,000. Cambridge Investment Research Advisors Inc. raised its holdings in shares of Applied Digital by 39.6% during the second quarter. Cambridge Investment Research Advisors Inc. now owns 146,633 shares of the company's stock valued at $5,469,000 after purchasing an additional 41,562 shares during the last quarter. Dimensional Fund Advisors LP bought a new position in Applied Digital during the first quarter valued at approximately $1,970,000. Situational Awareness LP lifted its position in Applied Digital by 14.1% during the second quarter. Situational Awareness LP now owns 15,384,616 shares of the company's stock valued at $574,000 after purchasing an additional 1,906,178 shares during the period. Finally, TFR Capital LLC. lifted its position in Applied Digital by 425.3% during the first quarter. TFR Capital LLC. now owns 372,960 shares of the company's stock valued at $9,497,000 after purchasing an additional 301,954 shares during the period. Institutional investors own 65.67% of the company's stock.

Applied Digital Company Profile

Applied Digital Corporation NASDAQ: APLD develops and operates digital infrastructure designed to support high-performance computing, artificial intelligence and other data-intensive applications. The company provides data-center capacity and related services to customers that require substantial computing power and electricity.

The company's business has included hosting infrastructure for cryptocurrency-mining operations and, increasingly, developing facilities for artificial intelligence and high-performance computing workloads.

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