Needham Reaffirms Bullish View on Applied Digital (APLD) Following Landmark Ellendale Lease

On Monday, June 2, Needham’s John Todaro reaffirmed his Buy rating on Applied Digital Corporation (NASDAQ:APLD), keeping the price target unchanged at $10. He highlighted the company’s new 15-year, 250-megawatt (MW) lease agreement with CoreWeave Inc. (NASDAQ:CRWV) at its Ellendale site as a significant development with the potential to strengthen Applied Digital’s revenue profile and strategic industry position.

Over the term of the agreement, Applied Digital expects to generate approximately $7 billion in total revenue. The deal also gives CoreWeave the option to access an additional 150 MW of capacity at the same site, further reinforcing Ellendale’s potential as a scalable hub for expanding high-performance computing (HPC) workloads. Wes Cummins, Chairman and CEO of Applied Digital, aptly described Ellendale as a launchpad for the future of AI infrastructure, rather than just a development project.

A panoramic aerial view of a modern data center with high-performance computing.

According to the analyst, this agreement stands out for both its scale and strategic value. It not only brings in a sizable revenue stream, starting at $360 million and projected to grow over time, but also helps establish the Ellendale facility as a viable option for large-scale infrastructure clients. The association with CoreWeave, a company that works with major hyperscalers such as OpenAI, Microsoft, and Google, may help Applied Digital attract additional interest from enterprise customers.

Todaro also noted the solid potential benefits of the lease, with net operating income margins expected in the 88%-90% range, supporting a high-yield profile for the asset. While Applied Digital has previously faced setbacks, particularly around the execution of agreements with Macquarie, Todaro does not rule out the possibility of Macquarie re-engaging with the company under revised terms.

In addition, Applied Digital plans to seek project financing soon, with a targeted loan-to-value ratio of 70%. This could provide the necessary capital to advance development while maintaining balance sheet flexibility.

Investors responded to the deal with enthusiasm, as the stock surged 48% on Monday, with an additional 8% gain in pre-market trading at the time of writing.

Applied Digital Corp. is engaged in designing, developing, and operating cutting-edge digital infrastructure throughout North America. Originally a crypto miner, the company terminated mining operations in early 2022 and transitioned to offering digital infrastructure solutions and cloud services to the fast-growing sectors of High-Performance Computing (HPC) and AI.

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