B. Riley has kept its $75 price target on Applied Digital (NASDAQ: APLD), citing an improving construction record and expectations that future capacity will attract higher lease rates.
The investment bank based its assessment on Applied Digital’s delivery of the first phase of Building 2 at Polaris Forge 1 on June 30, adding 75 MW of capacity on schedule.
That delivery brought total live capacity at the campus to 175 MW, which B. Riley described as evidence that Applied Digital can execute its larger development pipeline.
Building 2 took 12 months to complete, a significant improvement compared with the 24 months required for the first building at the same site.
Management attributed the faster timeline to better construction sequencing, a refinement that analysts view as a positive signal for future project delivery across the company’s portfolio.
Applied Digital is currently negotiating leases covering 100 MW of uncontracted capacity at Polaris Forge 2 and 150 MW of expansion capacity across Delta Forge 1 and Delta Forge 2.
B. Riley expects those potential agreements to carry higher rates than the company’s existing leases, though all 250 MW of capacity remains under negotiation at this stage.
Borrowing costs have also declined meaningfully, with Applied Digital pricing $2.15 billion of senior secured notes to fund 200 MW at Polaris Forge 2 with a 6.750% coupon.
That coupon compares favorably to the 9.250% coupon on the company’s legacy notes due in 2030, and B. Riley expects financing costs could improve further as campuses enter service.
Power supply represents another key component of the bank’s investment thesis for Applied Digital, which owns approximately 10% of Base Electron.
Base Electron is developing approximately 1.2 gigawatts of natural-gas generation in the Dakotas alongside regional utility partners, a development B. Riley views as strategically significant.
The bank said that generation capacity, combined with existing utility relationships, could allow current campuses to expand beyond their contracted capacity once additional power becomes available in the region.
