Stock Movers: Applied Digital, Rocket Lab, Netflix
On this episode of Stock Movers: - Applied Digital (PLD) shares fall after the digital infrastructure company reported third-quarter results that missed expectations for revenue and adjusted Ebitda. Analysts remain focused on when the company will sign a lease with a hyperscaler. - Rocket Lab (RKLB) shares rise after the company said it was selected to provide hypersonic test launch capability through development programs in the US and UK. The company intends to bid for contracts and task orders across both programs with its Hypersonic Accelerator Suborbital Test Electron launch vehicle - Netflix (NFLX) shares rise after the Wall Street Journal reported that the streaming-video giant aims to double its revenue and reach a $1 trillion market capitalization by 2030.
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This Nvidia-Backed AI Stock Soared 103% Last Week—Watch These Key Levels
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Applied Digital (NasdaqGS:APLD) Reports $200 Million Follow-On Equity Offering
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is still struggling to prove its business model is sustainable. Applied Digital's data center business could grow rapidly as the AI market expands. DigitalOcean's flexible pricing plans are attracting customers to its cloud platform. 10 stocks we like better than › (NYSE: AI) went public four and a half years ago to some enthusiasm, but it now trades nearly 40% below its IPO price. The enterprise AI software maker initially impressed investors with its catchy ticker symbol, the flexibility of its modules (which can be integrated into an organization's existing software), and its rapid growth rates. Unfortunately, its growth cooled off, its losses racked up, and its customer concentration issues became more apparent. On the bright side, top-line growth accelerated again in its fiscal 2024 and fiscal 2025 (which ended in April), and it extended its crucial deal with its largest client, Baker Hughes -- which accounts for more than 30% of its revenue -- for another three years. It also won more federal contracts, secured new cloud partnerships, rolled out fresh generative AI tools, and expanded beyond its core subscription model by introducing consumption-based pricing options. From fiscal 2025 to fiscal 2027, analysts' consensus expectation is for revenue to grow at a compound annual rate of 19%. But trading at 7.5 times this year's sales, doesn't look cheap. It also doesn't expect to turn profitable anytime soon as it ramps up its spending on new AI services. Assuming matches analysts' estimates, and then grows its revenue by another 19% in fiscal 2028, but trades at a more modest 5 times forward sales, its market cap would actually decline by about 6% from $3.5 billion now to $3.3 billion over the next two years. So instead of wondering if will ever revisit its IPO price, it might be smarter to invest in two less valuable AI-driven stocks that could surpass market cap by 2027: Applied Digital (NASDAQ: APLD) and DigitalOcean (NYSE: DOCN). Applied Digital builds big data centers and rents them out to cloud and AI companies like Microsoft and Amazon. It has been a major beneficiary of the AI boom and has been transitioning into a real estate investment trust (REIT) -- a type of business that has particularly favorable tax advantages, but must pay out at least 90% of its taxable income each year as dividends. Applied Digital currently operates five data centers, all of which are located in North Dakota, and it plans to open additional centers in South Dakota and Iowa in the near future. In 2023, it launched a first-party cloud infrastructure platform powered by its own servers in its own data centers. That business grew rapidly, but it was a capital-intensive strategy that awkwardly put it in competition with some of its biggest clients. That's why it recently announced that it was going to sell that business and streamline its operations amid its ongoing transition into a REIT. From its fiscal 2024 to its fiscal 2027 (which will end in May 2027), analysts expect its revenue to grow at a compound annual rate of 48% and see it narrowing its net losses. However, those estimates don't account for the planned sale of its cloud computing segment -- which grew rapidly and accounted for about a third of its revenue in its latest quarter. The market's views will need to be revised if it completes that divestment. Applied Digital currently trades at 13.5 times its projected sales for fiscal 2025 -- pricier than -- and has a market cap of $3 billion. But if it divests its cloud business and plows that cash into quickly opening more data centers to serve the booming AI market, it could justify that higher valuation. If that happens, Applied Digital might just grow to eclipse valuation over the next two years. DigitalOcean operates a cloud infrastructure platform that carves out tiny "droplets" of servers for smaller customers that don't need much computing power. 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But if it matches analysts' estimates, then grows its revenue by another 14% in 2028, and trades at a more generous 5 times its forward sales, its market cap could more than double to $6.6 billion by the final year. It could also be a tempting takeover target for a bigger cloud infrastructure company. Before you buy stock in consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $868,615!* Now, it's worth noting Stock Advisor's total average return is 792% — a market-crushing outperformance compared to 171% for the S&P 500. 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