Today, Applied Digital (APLD, Financial) stock is experiencing a significant decline, falling 8.89%. This movement reflects the gloomy sentiment in the broader market as investors react to new economic policies that could impact various sectors.
Applied Digital Corp (APLD, Financial), which operates in the technology sector offering data-center services, has been caught in the crossfire of the newly announced U.S. tariffs on foreign-sourced products. As the company relies on overseas hardware, including Nvidia GPUs manufactured with chips from Taiwan Semiconductor Manufacturing, these tariffs are likely to increase operational costs and impact its financials.
The company's stock performance reflects this vulnerability. Currently trading at $5.685, APLD shows warning signs in its financial metrics. The company has a severe Altman Z-score of -0.04, indicating a distress zone and potential bankruptcy risks in the next two years. With a Piotroski F-Score of 2, it suggests poor operational efficiency. Additionally, Applied Digital has been losing money consistently over the past three years, as indicated by its operating income loss.
Despite its challenges, Applied Digital has shown some positive revenue growth, with a one-year revenue growth of 25.9%. However, its financial health remains a concern, particularly with a high debt issuance of USD 634.757 million over the past three years. The company's financial strength is rated poor, mainly due to its high leverage and lack of profitability.
As for valuation, the stock's Price-to-Book (PB) ratio stands at 2.83, and its Price-to-Sales (PS) ratio is 4.01. The company's GF Value is identified as a "Possible Value Trap," urging investors to think twice before investing. The GF Value score stands at 52, reflecting its speculative growth nature.
Looking ahead, the tariffs are poised to delay Applied Digital’s profitability as hardware costs rise. While the company operates in the promising AI and high-performance computing sectors, achieving financial stability will require navigating these economic challenges effectively.
