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NeoPhotonics (NPTN) Surges 5.6%: Is This an Indication of Further Gains?

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NeoPhotonics (NPTN - Free Report) shares rallied 5.6% in the last trading session to close at $10.01. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 25.5% loss over the past four weeks.

NeoPhotonics extended its rally, driven by the upgrade in its shares from ‘Neutral’ to ‘Buy’ made by D.A. Davidson’s analyst Thomas Diffely. This is primarily attributed to the company’s strong valuation and high-growth optical total addressable market size. Moreover, optimism regarding the size of its serviceable addressable market size is noteworthy.

Apart from this, NeoPhotonics is continuously benefiting from its robust product portfolio for High Speed Over Distance applications. Moreover, growth prospects associated with its 400ZR and 400ZR+ pluggable transceiver modules on the back of the increasing proliferation of cloud services, 5G wireless rollouts, AI, Machine Learning, remote working, 3D sensing and LIDAR applications are major positives, as discussed at its yesterday’s event — Trends and Technology: 400G Pluggable Modules for DCI to Long Haul Applications.

Price and Consensus

Price Consensus Chart for NeoPhotonics

This maker of components for communications networks is expected to post quarterly loss of $0.17 per share in its upcoming report, which represents a year-over-year change of -200%. Revenues are expected to be $59.93 million, down 38.5% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For NeoPhotonics, the consensus EPS estimate for the quarter has been revised 8.6% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on NPTN going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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