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Trump Reverses Course On ZTE And Optical Stocks Follow

Ezra Schwarzbaum

Optical stocks jumped Monday following a weekend tweet from President Donald Trump indicating a reversal of last month’s move to ban American companies from doing business with China’s ZTE Corp.

What Happened

The U.S. Department of Commerce announced April 16 that American companies would be banned from selling components to ZTE for seven years. The move was in response to the company violating U.S. sanctions against sales to Iran and North Korea.

The ban threatened ZTE’s survival, with the company shutting down its main business operations May 9. In an exchange filing, the company stated it “maintains sufficient cash and strictly adheres to its commercial obligations subject in compliance with laws and regulations.”

In response to the news, optical stocks with exposure to ZTE faced heavy selling pressure, led by Acacia Communications, Inc. (NASDAQ: ACIA), which dropped 38.2 percent by the day’s close.

What To Watch

Several of those same companies were trending up Monday, again led by Acacia. The stock was up 13.87 percent at the time of publication. 

Oclaro Inc (NASDAQ: OCLR) was up 5.95 percent. Shares of the company had dropped 15.2 percent when the ban was first announced.

Applied Optoelectronics Inc (NASDAQ: AAOI) was trading up 1.4 percent. The stock was relatively unaffected by the ban, trading down as much as 5.3 percent on April 16 but ultimately ending the day within 1 percent of its previous close.

Finisar Corporation (NASDAQ: FNSR) was up 2.9 percent Monday morning. The stock had fallen 4 percent on the Commerce Department news in April.

Several other optics stocks stand to gain. In a Monday note, Bank of America Merrill Lynch analyst Vivek Arya also highlighlited the semiconductor space as one that could benefit from the news. Other stocks to watch include:

  • Lumentum Holdings Inc (NASDAQ: LITE)
  • Ciena Corporation (NYSE: CIEN)
  • Coherent, Inc. (NASDAQ: COHR)
  • II-VI, Inc. (NASDAQ: IIVI)
  • Inphi Corporation (NYSE: IPHI)
  • Skyworks Solutions Inc (NASDAQ: SWKS)
  • Integrated Device Technology Inc (NASDAQ: IDTI)
  • Qorvo Inc (NASDAQ: QRVO)
  • Xilinx, Inc. (NASDAQ: XLNX)
  • Broadcom Inc (NASDAQ: AVGO)

Related Links:

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

Tellurian, Applied Optoelectronics Capture Short Sellers' Attention

Latest Ratings for OCLR

Date Firm Action From To
May 2018 B. Riley FBR Maintains Neutral Neutral
Apr 2018 Morgan Stanley Maintains Equal-Weight Equal-Weight
Mar 2018 UBS Upgrades Sell Neutral

View More Analyst Ratings for OCLR
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