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Shares of Applied Optoelectronics (AAOI - Free Report) soared more than 10% in early morning trading Wednesday after analysts from Rosenblatt Securities said the company has regained market share at key clients thanks to weakness from competitors.
According to Rosenblatt analyst Jun Zhang, the firm’s expert on the Chinese tech market, it is possible that hyperscale price drops and Huawei and ZTE pulling in orders could lead to positive benefits for Applied Opto.
The analyst said that his research suggests AAOI has gained market share at Facebook versus Innolight Technology, a subsidiary of China’s Shandong Zhongji Electrical Equipment Company, and could be on track to gain more business because of Innolight’s quality issues and aggressive pricing.
This positive note comes just three months after Zhang suggested that both Facebook and Amazon (AMZN - Free Report) were transferring a share of their optical equipment load to InnoLight. He argued that the shift to InnoLight might be inspired by the Chinese government’s push to grow its presence in the optical component industry amid growing demand, especially in the 5G market.
Applied Optoelectronics provides fiber-optic networking solutions, primarily for the cable television, fiber-to-the-home, and datacenter markets. The company manufactures products at varying levels of integration—from components and modules to complete turn-key equipment.
Applied sees about 80% of its total revenue from its datacenter operations. The firm’s three largest customers in this segment are Facebook, Amazon, and Microsoft (MSFT - Free Report) .
Shares of AAOI soared in the first six months of 2017 as investors recognized that the growth of these companies’ cloud operations should help suppliers like Applied, but the stock has come crashing back down as competition ratcheted up.
AAOI investors will hope that Zhang’s bullish sentiment becomes a trend among analysts soon. Within the past 60 days, the company has witnessed five analyst revisions to its full-year EPS estimates, with 100% agreement to the downside. This negative estimate revision activity has earned the stock a Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for AAOI’s annual earnings has slipped $1.24 over that timeframe. We now expect Applied Opto to witness its earnings plunge 49% on the back of a 12% decline in net sales in 2018.
AAOI shares bounced to an intraday day of $28.19 in early morning trading Wednesday, which represents a 25% improvement from the stock’s 52-week low. However, shares are still about 73% lower than their 52-week high.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Why Is Applied Opto (AAOI) Stock Soaring Today?
Shares of Applied Optoelectronics (AAOI - Free Report) soared more than 10% in early morning trading Wednesday after analysts from Rosenblatt Securities said the company has regained market share at key clients thanks to weakness from competitors.
According to Rosenblatt analyst Jun Zhang, the firm’s expert on the Chinese tech market, it is possible that hyperscale price drops and Huawei and ZTE pulling in orders could lead to positive benefits for Applied Opto.
The analyst said that his research suggests AAOI has gained market share at Facebook versus Innolight Technology, a subsidiary of China’s Shandong Zhongji Electrical Equipment Company, and could be on track to gain more business because of Innolight’s quality issues and aggressive pricing.
This positive note comes just three months after Zhang suggested that both Facebook and Amazon (AMZN - Free Report) were transferring a share of their optical equipment load to InnoLight. He argued that the shift to InnoLight might be inspired by the Chinese government’s push to grow its presence in the optical component industry amid growing demand, especially in the 5G market.
Applied Optoelectronics provides fiber-optic networking solutions, primarily for the cable television, fiber-to-the-home, and datacenter markets. The company manufactures products at varying levels of integration—from components and modules to complete turn-key equipment.
Applied sees about 80% of its total revenue from its datacenter operations. The firm’s three largest customers in this segment are Facebook, Amazon, and Microsoft (MSFT - Free Report) .
Shares of AAOI soared in the first six months of 2017 as investors recognized that the growth of these companies’ cloud operations should help suppliers like Applied, but the stock has come crashing back down as competition ratcheted up.
AAOI investors will hope that Zhang’s bullish sentiment becomes a trend among analysts soon. Within the past 60 days, the company has witnessed five analyst revisions to its full-year EPS estimates, with 100% agreement to the downside. This negative estimate revision activity has earned the stock a Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for AAOI’s annual earnings has slipped $1.24 over that timeframe. We now expect Applied Opto to witness its earnings plunge 49% on the back of a 12% decline in net sales in 2018.
AAOI shares bounced to an intraday day of $28.19 in early morning trading Wednesday, which represents a 25% improvement from the stock’s 52-week low. However, shares are still about 73% lower than their 52-week high.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>