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Applied Optoelectronics Posts Q1 Earnings Miss: What Analysts Have To Say

Wayne Duggan

Applied Optoelectronics Inc (NASDAQ: AAOI) shares were dropping Thursday after the company reported first-quarter earnings and revenue the prior afternoon that came up short of analyst expectations.

Applied Optoelectronics reported a per-share loss of 27 cents, larger than the consensus estimates of a 22-cent loss. First-quarter revenue was $52.7 million, missing Wall Street expectations of $52.8 million.

Applied Optoelectronics is one of the market leaders in optical networking technology for datacenter and cable TV markets, but slumping datacenter demand is weighing on the company’s numbers, D.A. Davidson analyst Mark Kelleher said in a Thursday note. 

“Looking forward, AAOI emphasized the uncertainty of the demand picture, which will remain muted in the near-term,” the analyst said. 

Excess datacenter inventories and uncertainties in the China market will remain headwinds for Applied Optoelectronics in coming quarters, Kelleher said. 

However, he said there are still reasons to remain optimistic on the stock in the long-term.

“Looking further out, the company has an opportunity to address the developing 5G infrastructure market, particularly in the ‘front haul’ short-range connectivity market.”

Rosenblatt’s Bearish Take

Rosenblatt Securities analyst Jun Zhang is not so optimistic.

View more earnings on AAOI

It's becoming increasingly clear that Applied Optoelectronics has no near-term bullish catalysts, the analyst said in a Thursday note.  

“Competition in the hyperscale intra data center market will continue to increase, as more Chinese optical module suppliers enter the market."

Rosenblatt will remain bearish on the stock until Applied produces some meaningful design wins and/or makes a breakthrough in 400G technology, Zhang said. 

D.A. Davidson reiterated a Neutral rating on Applied Optoelectronics and lowered the price target from $16 to $11. 

Rosenblatt maintained a Sell rating with a $10 price target.

Related Links:

DA Davidson: Near-Term Applied Optoelectronics Outlook Blurred By Inventory Congestion, China Weakness

Applied Optoelectronics: How Amazon, Facebook And Microsoft Will Impact Its Q1 Earnings

Latest Ratings for AAOI

Date Firm Action From To
Feb 2019 Downgrades Buy Hold
Feb 2019 Downgrades Buy Neutral
Feb 2019 Downgrades Outperform Market Perform

View More Analyst Ratings for AAOI
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