Why Applied Digital Stock Is Jumping Today

Applied Digital (NASDAQ: APLD) stock is climbing Tuesday despite volatile swings for the broader market. The data center company's share price was up 3.9% as of 3 p.m. ET. The stock had been up as much as 14.9% earlier in the day's trading.

Applied Digital stock is getting a valuation boost today after receiving bullish analyst coverage. Lucid Capital initiated coverage on Applied Digital stock with a buy rating, and investors are responding by bidding up the artificial intelligence (AI) specialist's share price.

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Applied Digital stock jumps on analyst coverage

In coverage published before the market opened today, Lucid Capital gave Applied Digital stock a buy rating. The investment firm also set a one-year price target of $44 per share on the data center specialist's stock. As of this writing, Lucid's price target suggests additional upside of roughly 24%.

Lucid pointed to Applied Digital's data center strengths as catalysts that could help the company score wins for computational processing and cryptocurrency mining as power and infrastructure capabilities become more scarce in light of rising demand.

What's next for Applied Digital?

Applied Digital has been posting encouraging growth in conjunction with rising demand for data-center services. With its last reported quarter, Applied Digital saw revenue increase 84% year over year to reach $64.2 million. Meanwhile, the business posted a non-GAAP (generally accepted accounting principles) adjusted loss of $27.8 million -- narrowing substantially compared to the prior-year period.

Investment in AI infrastructure and related services is likely still in the early phases of a much larger growth trajectory. This trend bodes well for Applied Digital, but the stock still comes with a high degree of risk, with the company valued at approximately 33 times this year's expected sales.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.