Applied Digital Corporation (APLD) as a Momentum Stock: Should You Consider Buying?

Momentum investing relies on the idea of tracking a stock's recent price trends, whether they are moving up or down. In essence, investors buy stocks when prices are high, hoping to sell them at even higher prices. With this approach, recognizing and capitalizing on price trends is essential; once a stock takes a certain trajectory, it often continues moving in that direction. The strategy aims to yield timely and profitable trades.

Although momentum is a popular concept among investors, defining it can be challenging. There is much debate about which metrics are the most useful to focus on, but the Zacks Momentum Style Score offers some clarity. This score is part of the broader Zacks Style Scores system, designed to help investors gauge momentum effectively.

Now, let’s examine Applied Digital Corporation (APLD - Free Report). APLD currently has a Momentum Style Score of B. We will explore some of the key factors that contribute to this score, including price changes and earnings estimate revisions.

It's essential to understand that Style Scores complement the Zacks Rank, a rating system with a good record of success. Applied Digital Corporation holds a Zacks Rank of #2 (Buy), suggesting positive momentum. Historically, stocks categorized as Zacks Rank #1 (Strong Buy) or #2 (Buy) and possessing Style Scores of A or B tend to outperform the market in the subsequent month.

Potential for Market Success?

Let’s review some components of APLD's Momentum Style Score that indicate its promise as a robust momentum stock.

Examining a stock's short-term price movements is an effective way to measure its momentum. These movements reflect market interest and indicate whether buyers or sellers currently dominate. Comparing a stock's performance against its industry can also help investors identify leading companies within a sector.

For Applied Digital Corporation, its shares have risen by 2.54% over the past week, while the Zacks Financial - Miscellaneous Services industry has only seen a modest increase of 0.2% during the same timeframe. The company has performed well over a longer period, having achieved a 28.88% price change in the past month, significantly surpassing the industry's meager 0.97% growth.

To truly gauge a stock’s strength, it's vital to look at long-term metrics. In the last quarter, Applied Digital Corporation's shares soared by 66.78%, and over the past year, they have increased by 78.33%. For comparison, the S&P 500 index has only appreciated by 10.75% and 34.53%, respectively, during those periods.

Trading volume can also provide crucial insights into a stock's momentum. APLD's average trading volume over the last 20 days is around 16,689,773 shares. Rising volumes with an increasing stock price usually signal positive momentum, while declining volumes with a falling stock price are typically viewed negatively.

Earnings Forecast

The Zacks Momentum Style Score considers various factors, including earnings estimate revisions and price movements. Earnings estimates play a critical role in the Zacks Rank, and positive revisions can indicate good prospects for a stock. Recently, APLD has shown encouraging trends in this area.

In the past two months, four analysts have raised their earnings estimates for APLD for the full year, while none have lowered their expectations. This led to an upward revision of the consensus estimate, increasing from -$1.12 to -$0.40 over the past two months. For the next fiscal year, one estimate has risen with no downward adjustments during the same period.

Conclusion

In summary, APLD's promising trends and supportive metrics lead to its classification as a #2 (Buy) stock and a Momentum Score of B. If you are looking for a potential stock that may thrive in the near term, consider adding Applied Digital Corporation to your investment list.

Investing, Stocks, Momentum