Could Applied Digital (APLD) Stock Triple by 2030?
Key Points
Despite Applied Digital's great potential, it's not a no-brainer buy.
The stock is richly valued, the company isn't yet posting profits, and it's carrying a lot of debt.
Still, it might indeed triple in value by 2030.
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It's a good question: Could Applied Digital (NASDAQ: APLD) shares triple in value by 2030? After all, its shares have more than quadrupled in price over the past year!
My answer to the question is this: It could. No one can know for sure how any stock will perform in the short term, and there's both a bullish and a bearish case for Applied Digital.
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Why might Applied Digital triple by 2030?
Applied Digital is operating in a sweet spot these days, as it specializes in building data centers for artificial intelligence (AI) processing. That's a promising field, as Goldman Sachs has projected that U.S. data center energy demand will double by next year. Applied Digital builds and then leases out lots of data centers, and projects at least $36 billion in lifetime lease revenue from its contracts so far -- and potentially as much as $86 billion.
The company is growing briskly. Its third quarter featured revenue up 139% year over year, and a net loss of $101 million, down 179%. If it keeps signing contracts, it might end up raking in far more than that $86 billion in revenue mentioned above.
Why might Applied Digital not triple by 2030?
A key reason why Applied Digital might not triple within a few years is that it's quite richly valued at recent levels. Its price-to-sales ratio recently hit a very high 31, for example. So it might retract on its own if there's some bad or even potentially bad news (such as a customer backing out of a contract), and it might fall sharply if there's a market downturn -- as many growth stocks might.
On top of that, Applied Digital has been taking on a lot of debt in order to build its data centers, and so far, it's not turning a profit. Overall, it looks like a risky proposition to me. If you want a piece of it, perhaps bite off a small piece, invest in it over time, or just wait for a more compelling stock price.
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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.
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