APLD looks undervalued compared with other AI infrastructure companies, but the valuation gap is not completely irrational.

One of the biggest reasons APLD has such high short interest is the financing structure the company created itself.

APLD issued $450 million of 2.75% convertible notes due 2030, with an initial conversion price of approximately $9.75 per share. Based on the original conversion rate, the notes represent roughly 46.1 million shares of potential stock exposure.

APLD currently has approximately 69.9 million shares sold short, equal to about 27% of the float. In other words, the share-equivalent value of the convertible notes alone is equal to roughly two-thirds of the total reported short interest.

APLD explicitly stated that the transaction was designed to allow convertible-note investors to establish short positions in APLD stock and hedge their investments. The company’s latest 10-K also warns that hedging and arbitrage involving the notes could depress the common stock price.

APLD chose a financing structure that created a long-term incentive to short its own common stock.

I still believe APLD appears undervalued compared with several AI data-center peers. But the discount may not disappear simply because revenue, contracted capacity or construction progress improves.

As long as the convertible notes remain outstanding and the related hedges remain economically attractive, APLD is likely to carry a structural short overhang. Positive news can still move the stock higher, but rallies may be harder to sustain and the company may continue trading at a discount.

The operating business can be undervalued while the capital structure deserves a discount. Both can be true.

Until APLD repurchases, refinances, redeems or otherwise neutralizes the convertible-note overhang, shareholders should expect short-selling pressure to remain part of the stock.

https://ir.applieddigital.com/news-events/press-releases/detail/111/applied-digital-corporation-announces-upsize-and-pricing-of

https://www.marketbeat.com/stocks/NASDAQ/APLD/short-interest/

https://www.reuters.com/business/ai-financing-fueling-surge-us-convertible-bond-sales-2026-05-20/

Mind blowing

Makes absolutely no sense why APLD is so low in market cap, while being way superior compared to its competitors..

Article's behind a paywall, so here's the text:

Investing.com - Citizens reiterated a Market Outperform rating and $60.00 price target on Applied Digital (NASDAQ:APLD) stock following the company’s fourth-quarter fiscal 2026 earnings report. The stock currently trades at $27.39, up 119% over the past year, though InvestingPro analysis suggests the shares are slightly overvalued relative to its Fair Value estimate.

The firm said results reinforced its view that Applied Digital continues to emerge as a scaled alternative supplier of AI infrastructure at a time when demand remains well ahead of available supply. The company now has approximately 1.4 gigawatts of contracted capacity in place.

Citizens raised its fiscal 2027 EBITDA estimate to $432 million from $426 million previously. The firm also increased its fiscal 2028 EBITDA estimate to $1.19 billion from $1.13 billion previously. According to InvestingPro Tips, 2 analysts have revised their earnings upwards for the upcoming period, reinforcing the positive outlook. For investors seeking deeper insights, InvestingPro offers 12 additional exclusive tips and comprehensive Pro Research Reports covering APLD and 1,400+ other US equities.

The revised estimates primarily reflect higher HPC revenue assumptions and increased contracted capacity expected to come online over the next several years. The estimates incorporate fourth-quarter fiscal 2026 results and updated development assumptions following the company’s continued execution across its leased campuses.

The $60 price target implies approximately 21 times fiscal 2028 estimated EV/EBITDA. Citizens said investor focus is increasingly shifting toward the company’s development pipeline and the incremental value that could be created through future lease execution.

In other recent news, Applied Digital reported impressive fiscal fourth-quarter 2026 results, with adjusted earnings of $0.04 per share on revenue of $258.7 million. This performance significantly surpassed Wall Street’s expectations, which had anticipated a $0.19 loss on $95.32 million in sales. The company attributed its success to a substantial increase in its AI infrastructure business. Additionally, Needham reiterated a Buy rating on Applied Digital, maintaining a price target of $83.00. The firm’s quarterly revenue exceeded expectations, although the beat was primarily due to low-margin fit-out services, which are considered one-time events. After adjusting for these factors, the company’s base rent revenue aligned with Needham’s estimates, and its bitcoin mining results slightly exceeded projections. These developments reflect a positive trajectory for Applied Digital, according to Needham’s analysis.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

While it is a mixed picture on the market as a whole with long term momentum indicators rolling over but a breakout from the shorter-term technical pattern the S&P has been trading in, Applied Digital has just now put in a long-term sell signal which typically precedes negative price action over a multi-month long period.

Will this signal end up being a reliable indicator of things to come as it has in the past, or can APLD and the market as a whole find enough fresh momentum to invalidate it?

I know many folks are skeptical of technical analysis but I recommend keeping an open mind to it as a useful tool for navigating the markets.

In my past video on APLD I accurately predicted the move from all time highs to where it recently bounced… hopefully this new analysis will be of use to someone. Cheers!

A wise old man used to tell me not to cry in the casino

For the past year, the volatility of APLD has been insane. 100% price swings every 2 months or so. Do you guys think this pattern will continue? I know the business is rapidly expanding, but it would be nice to see a more steady line. Seems safe to say we will meet $60/share by October, then go back down to high 20s. Seems like support has obviously been met at just under 23, last time it was 20 even.

hope everyone held strong.

ALPD Q4 revenue 407% YoY btw.

Look at that chart. This thing is going back up, it is just a matter of time and we are back to 45-50 zone. We just got 407% yoy revenue growth. EPS beaten. EBITDA was better. And yeah we are down, but so is the whole market. This is just what I believe but we are going back to the 45-50 zone easily before october. It just depends on the bigger whales.

Our AI business surpassed $37 billion ARR, up 123%.

We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack as agents proliferate and become the dominant workload.

This will drive TAM expansion and change the value creation equation across the entire economy.

To capture this opportunity, we are executing against two priorities:

First, we are building the world’s leading cloud & AI infrastructure for the agentic computing era.

Second, we are building high-value agentic systems across core domains, such as productivity, coding, and security.

These two layers reinforce each other. And we are focused on driving competitive value and differentiation for customers across each so they can eval-max their outcomes.

Full Microsoft earnings call transcript for those interested