Applied Digital (APLD 3.63%) has been quite a hot stock lately, nearly quadrupling in value (up 286%) over the past year, as of March 23. Over the past decade, it has averaged annual gains of 77% -- much of that thanks to the past year's meteoric rise, of course.
You may be wishing you had invested in it a decade ago and wondering whether it's too late to jump in now. Here are some thoughts.
Image source: Getty Images.
For starters, know that Applied Digital designs, develops, and operates digital infrastructure solutions and cloud services for high-performance computing (HPC) and artificial intelligence (AI) industries. Among other things, it's involved in designing and building data centers and in offering infrastructure services for crypto miners. In other words, it's heavily involved in a lot of fast-growing areas.
In order to do all that, the company has been investing significant sums in its own infrastructure. The company recently sported a market value of around $7.5 billion (as of March 24), and it's planning to borrow around $2.15 billion to build out its Polaris Forge 2 AI campus.
Check out its last earnings report, and you'll be pleased to see revenue up 250% in the second quarter, to $126.6 million, but also a net loss of $31.2 million (smaller than the year-earlier loss). Meanwhile, it also carried $2.6 billion in long-term debt.
NASDAQ: APLD
Key Data Points
My colleague Leo Sun, while suggesting that Applied Digital is still a buy at recent levels, noted: "Last December, it announced it would spin off its cloud computing business and merge it with EKSO Bionics Holdings to create a new company called ChronoScale. That divestment, which hasn't yet closed, will throttle near-term revenue growth but stabilize margins."
I, too, would love to be a shareholder, but so far I'm holding off due to valuation concerns and also because the company has been posting losses instead of gains for some time now. The stock could keep surging from here, but there's no margin of safety. And there are plenty of other exciting growth stocks out there.
