Why Applied Digital Could Exceed Street Expectations: Analyst Forecasts Earlier Deliveries On AI Contracts

Needham analyst John Todaro raised the price target on Applied Digital Corp APLD to $17.5 from $16 with a Buy rating.

The analyst is bullish on the company's better-than-expected FY24 guidance following its Q4 FY23 earnings results reported yesterday. 

APLD reported Q4 FY23 revenue of $22 million, up 193% Y/Y, which missed the consensus of $29.57 million, while adjusted EPS of $(0.01) was better than the consensus of $(0.04).

For FY 2024, the company expects revenue within $385 million – $405 million (vs. consensus of $308.8 million) and adjusted EBITDA of $195 million – $205 million.

Consequently, Todaro raised the estimates for revenue to $372 million (from $309 million), and adj. EBITDA to $168 million (from $97 million) to move closer to the guidance. 

The analyst's revised estimates reflect increased confidence in the company's AI & HPC efforts and demand pipeline.

Notably, Todaro believes APLD can deliver on its first and second Character AI contracts earlier than the Street's expectations. 

The analyst projects AI revenue to ramp through April 2024 on GPU delivery.

Price Action: APLD shares are up 18.7% at $10.42 on the last check Tuesday.