Applied Optoelectronics (NASDAQ; AAOI) is a former high-flying stock whose shares are in danger of giving up much of its gains. After topping $103.41 in the July-August timeframe, the stock plunged even though its Q2 results at the time impressed investors. Fears over a 100G order slowdown is hurting the share price.
AAOI has growth potential through servicing the Chinese market. If bears, which are betting sales are dropping in the region, are right in their forecast, Applied has risks of facing slower revenue growth. 100G transceiver demand is still strong, which should justify the earnings potential for AAOI in the quarters ahead.
In the summer, analysts expected AAOI will earn $5.14 a share this year. In fiscal-year 2018, it may earn $5.53 a share and in FY 2019, earnings could jump to $5.80 a share. At a recent stock price of around $58, AAOI trades at a 10x forward P/E.
In the second quarter, AAOI reported, on August 3, sold GAAP gross margin of 45.4%, up from 31.3%. Revenue grew the most in Datacenter, up 141% to $99.3 million. But AAOI let down bulls by forecasting Q3 revenue of up to $115 million. The consensus estimate was $122.99 million. Still, AAOI forecast earnings of up to $1.43 a share, compared to the $1.30 a share consensus forecast.
Takeaway
AAOI could exceed Q3 estimates if demand in the Datacenter unit improves unexpectedly.
Tech Insider
