On Friday, B.Riley adjusted the financial outlook for Applied Blockchain Inc (NASDAQ: APLD), reducing the price target from $10.00 to $8.00, while maintaining a Buy rating on the company's shares. The revision reflects the recent challenges faced by the company, including issues at its Ellendale and Garden City locations during the first quarter of 2024.
The firm noted that it has updated its projections for Applied Digital Corporation to take into account the aforementioned operational issues. It also anticipates a gradual improvement in the utilization rate at Ellendale.
This update follows Applied Blockchain's announcement on March 15, 2024, that it would sell its 200 MW data center in Garden City to Marathon Digital (NASDAQ:MARA) Holdings. The net purchase price of this deal is approximately $87.3 million, with a gross purchase price of $97.3 million after adjustments, as stated in the purchase agreement.
In addition to the purchase price, the transaction will also free up $12 million of restricted cash that was previously tied up as collateral for the site’s letter of credit. The sale is awaiting the fulfillment of standard closing conditions and is slated to be finalized in the second quarter of the calendar year 2024.
The firm has also revised its forecast for Applied Blockchain's adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the third fiscal quarter of 2024 and the full fiscal year 2024. The estimates have been lowered from $17.6 million to $10.4 million for FY 3Q24, and from $75.5 million to $54.9 million for FY 2024.
Consequently, the price target for Applied Blockchain's stock has been adjusted accordingly from the previous $10 to the current $8.
InvestingPro Insights
Analysts are closely monitoring Applied Blockchain Inc (NASDAQ: APLD) as the company navigates through its recent challenges. With B.Riley's revised price target in mind, here's what real-time data from InvestingPro is indicating about the company's financial health and market performance:
InvestingPro data shows a significant revenue growth of 312.24% over the last twelve months as of Q2 2024, suggesting that despite operational issues, Applied Blockchain has been expanding its top-line earnings. However, the company's P/E ratio stands at -12.81, reflecting its current lack of profitability. The market has reacted to these mixed signals, with the stock price experiencing a 1-week total return of -23.6%, indicating recent investor skepticism.
Among the InvestingPro Tips, two are particularly relevant to investors following the B.Riley update. Firstly, analysts are not expecting Applied Blockchain to be profitable this year, aligning with B.Riley's lowered EBITDA forecast. Secondly, the stock's volatility is highlighted by its significant price movements, which could be attributed to the operational challenges and the recent sale of the Garden City data center.
For those seeking a deeper dive into Applied Blockchain's financials and market position, InvestingPro offers additional insights. Currently, there are 18 more InvestingPro Tips available for APLD, which can provide further guidance on investment decisions. To access these tips and more detailed analytics, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Despite the recent price target adjustment by B.Riley, Applied Blockchain's aggressive revenue growth and the strategic sale of its data center suggest a company in the midst of a significant transformation. Investors would do well to keep an eye on both the challenges and opportunities that lie ahead for APLD.
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