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ddbikessamsara 3 posts  |  Last Activity: Apr 22, 2016 3:34 PM Member since: Oct 5, 2004
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  • ddbikessamsara by ddbikessamsara Apr 22, 2016 3:34 PM Flag

    Just reviewed the corporate presentation again (page 9 of the presentation on the website, in the Investor Relations section, presentation dated 3/7/2016). It's pretty clear that 2016 is expected to be a fairly modest year for 100G products and the company is smack in the middle of the transition. No big surprise that margins are a bit down since they are selling legacy stuff and the initial wave of 100G demand has not really kicked in yet. But looking ahead to 2019, 100G is projected to dominate with 40G virtually disappearing. Analysts (always taken with a grain of salt but nonetheless the market seems to value their opinon) are calling for earnings in 2017 of $1.61 per share. Slap a PE of 20 on that and it's a $32 stock. What about 2019 when 100G is running everything? Buy and hold - this has the potential to be a monster gainer over the next few years - forget the quarterly madness.

    Sentiment: Strong Buy

  • Reply to

    So what exactly happened?

    by bulbhead2711 Apr 21, 2016 4:14 PM
    ddbikessamsara ddbikessamsara Apr 21, 2016 6:05 PM Flag

    I don't think much happened except the same stuff that happens to ANY company when the market is obsessed with quarterly performance. Name a single company in the history of the world that has not "missed" a quarter. Product lines change, transitions occur, lots of stuff happens all the time to real companies in the real world that make the precious analysts wrong with their precious models all the time.

    When these big selling waves begin they kind of take on their own momentum, and the market makers gladly help out by plunging the ask to shake out as many suckers as possible. Shorts smell blood and pile on to make a few bucks. NASDAQ is entirely a market maker based system and all shares are coming from a market maker somewhere. It is ALWAYS in their best interest to buy inventory as cheaply as possible so they do everything they can to walk the price down, pick up cheap stop losses etc. These big plunges tend to drive margin call selling as well - it happens all the time, over and over again. This is just another classic example of the same pattern repeating itself. Hard to ever call the exact bottom but usually buying a quality stock after one of these crazed short-sighted sellloffs has been a pretty good move. The company has stated they expect the transition to 100G and DOCSIS 3.1 to begin in earnest later this year so picking up a position here and holding should be a good move with any patience. It may still drift lower since a lot of buying interest will probably be on hold until the call gives more clarity but I bought yesterday and today and plan to hold for a couple of years. 100G is clearly the next big upgrade cycle for data centers as is DOCSIS 3.1 for cable operators. AAOI is very well positioned to ride the wave - what's happening this quarter is largely irrelevant except as a trading point. Look at the chart - the stock has only been this cheap for a few weeks in late '14 early '15.

    Sentiment: Buy

  • ddbikessamsara ddbikessamsara Apr 21, 2016 12:48 PM Flag

    Given the nature of market makers and their ability to manipulate prices I would say some level of downside risk remains but it does seem an overall favorable entry point. If the 100G cycle and DOCSIS 3.1 seriously gain traction this year the stock could double from here into 2017. Could be a 3-year upgrade cycle underway - the call will reveal a lot. In the meanwhile the MM's will do their thing to get prices as cheaply as they can so don't be surprised to see a few more down days as they continue to fish for stop losses and generally try to walk the stock down.

    Sentiment: Buy