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On Monday, Needham adjusted its outlook on Applied Blockchain Inc (NASDAQ:APLD), reducing the stock price target to $13 from the previous $16 while maintaining a Buy rating on the company’s stock. The decision comes after Applied Blockchain announced the sale of its 200MW Garden City, TX site to a buyer for $87 million in net proceeds, equating to $435k per MW.
This transaction is seen as favorably priced for the buyer and marks a strategic shift for Applied Blockchain, directing its focus toward the North Dakota High-Performance Computing (HPC) site currently under construction.
The sale of the Texas site has led to a reassessment of Applied Blockchain’s business, particularly its mining hosting operations, which were formerly viewed as a stable source of cash flow for the company. The change increases the level of uncertainty and execution risk associated with the company’s HPC and Cloud compute segments, prompting the revised financial expectations.
As a result of the transaction and its implications, Needham has revised its financial forecasts for Applied Blockchain, lowering the revenue and adjusted EBITDA estimates for fiscal years 2024 and 2025. The new projections account for a reduction in bitcoin mining hosting capacity, down to 280 MW from a run rate of 480 MW.
In addition, there have been reported outages and uncertainties surrounding the Ellendale, ND mining hosting operations, leading to decreased expected contributions from this segment. The timeline for revenue recognition from Sai computing is also anticipated to be longer than initially expected.
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