Just as it looked as though Applied Optoelectronics (NASDAQ: AAOI) found support for the stock at $60 a share, management issued a weak preliminary third-quarter report. This sent the stock down 20 percent on October 13.
The stock now trades at an 11x P/E and 8.4x forward P/E. Given the lower growth for the upcoming quarter and potentially a disappointing result for the year ahead, AAOI’s forward multiples may go up. That would deter value investors from considering Applied Optoelectronics and optical networking stocks.
AAOI forecast revenue as low as $88 million - $89 million, down from its $107 million - $115 million outlook. Non-GAAP EPS will now be in the range of $1.04 - $1.09, down from the $1.30 - $1.43 forecast. The downbeat earnings preview resets investor expectations and gives the company time now to focus on transitioning the business.
The demand for 40G and 100G are still healthy but Amazon.com (NASDAQ: AMZN) and other customers may have delayed the orders, causing the company to reset near-term expectations.
Oclaro (NASDAQ: OCLR) is familiar with its stock price falling after worries of a quarterly slowdown in its business. The stock is in the middle of a recovery. This could happen, too for AAOI stock.
