Applied Digital’s Massive $36 Billion Backlog Could Unlock Huge Upside

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Applied Digital (APLD) is analyzed, focusing on its $36 billion backlog of contracted lease value from 15-year take-or-pay agreements, which represents more than five times its current market capitalization of approximately $7 billion. The company is transitioning from crypto hosting to AI infrastructure, developing AI data centers. Its business model relies on securing long-term contracts with investment-grade hyperscalers, with 70% of revenue backed by such agreements. The average annualized net operating income (NOI) is expected to be around $2 billion. The company has secured a $1.59 billion offering of senior secured notes at 7%, due 2031, to fund its fourth building at Polaris Forge I and other operational needs. Management targets delivering 500 MW of new critical IT capacity annually, while market conditions remain favorable. The stock is trading at a price-to-sales ratio of 24.5x and a price-to-book value of 4.9x, with a 60-month beta of 5.7, indicating higher volatility than the S&P 500. Analyst consensus is a 'Strong Buy,' with average ratings around 4.58, suggesting the market is pricing in future growth rather than current results. Key risks include potential increases in costs, construction timelines, and financing expenses, which could impact the stock.

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