Is Applied Digital Corporation (APLD) a Solid Pick for Momentum Investors?

Momentum investing focuses on tracking a stock's recent trend, regardless of whether that trend is upward or downward. In a long position, investors aim to "buy high and sell higher," hoping to capitalize on the momentum that a stock has established. The idea is that once a stock sets a direction, it is likely to continue moving along that path, leading to timely and profitable trades.

While momentum is a widely recognized characteristic among stocks, measuring it can be challenging. There is considerable debate on the best metrics to use for identifying stocks with momentum. However, the Zacks Momentum Style Score offers a practical solution by defining specific criteria to evaluate momentum stocks.

Applied Digital Corporation (APLD) currently holds a Zacks Momentum Style Score of B, indicating its potential as a momentum stock. We will explore the key factors contributing to this score, such as price changes and earnings estimate revisions.

It is essential to note that Style Scores complement the Zacks Rank, which is a stock rating system with a strong history of performance. Applied Digital Corporation boasts a Zacks Rank of #2 (Buy). Research indicates that stocks with a Zacks Rank of #1 (Strong Buy) or #2 (Buy) and Style Scores of A or B are likely to outperform the broader market in the following month.

Performance Overview

Let’s delve into the components of APLD’s Momentum Style Score that indicate its promise as a viable momentum investment.

Assessing a stock's short-term price performance is an effective way to determine its momentum, reflecting current buyer or seller interest. It's also beneficial to compare a stock's performance against its industry to detect leading companies in a given sector.

For APLD, shares have risen by 2.54% over the past week, while the Zacks Financial - Miscellaneous Services industry has increased by only 0.2% in the same timeframe. Over the past month, APLD's price has appreciated by 28.88%, significantly outperforming the industry’s 0.97% gain.

To consistently outperform the market, a stock must demonstrate long-term price strength. Applied Digital Corporation shares have surged by 66.78% over the past quarter and have gained 78.33% over the last year. In contrast, the S&P 500 has achieved gains of only 10.75% and 34.53%, respectively, in similar time periods.

Another important factor for investors is the average trading volume of a stock. In the last 20 days, APLD’s average trading volume has been 16,689,773 shares, providing a solid baseline for price-to-volume analysis. A stock showing consistent price increases combined with above-average trading volume signals bullish potential.

Earnings Perspective

The Zacks Momentum Style Score incorporates multiple aspects, including earnings estimate revisions and price movement. Earnings estimates are vital to the Zacks Rank, and positive adjustments can strengthen a stock's outlook. Recently, APLD has exhibited favorable trends in this respect.

In the past two months, four earnings estimates for APLD have been revised upward, while none have been lowered for the full year. These adjustments have driven the consensus estimate up from -$1.12 to -$0.40 within the last 60 days. Additionally, for the next fiscal year, one estimate has been raised without any downward revisions.

Conclusion

Given the factors outlined, it's clear why APLD holds a #2 (Buy) status alongside a Momentum Score of B. If you are searching for a promising stock poised for a potential price increase, consider adding Applied Digital Corporation to your investment list.

APLD, Momentum, Investing