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Why Applied Optoelectronics Inc. Stock Fell 14% in January

Anders Bylund, The Motley Fool

What happened

Shares of Applied Optoelectronics (NASDAQ: AAOI) fell 14.4% in January, according to data from S&P Global Market Intelligence. One bearish analyst note did most of the damage.

So what

On Jan. 9, analyst firm Rosenblatt said that Applied Optoelectronics seemed to be losing some business to optical components rival InnoLight in several key accounts, including largest customer Amazon.com (NASDAQ: AMZN) and global computing giant Facebook (NASDAQ: FB). Amazon alone accounted for more than half of Applied Optoelectronics' data center revenues in November's third-quarter report, so any share loss there could do terrible damage to the company's top and bottom lines.

A bundle of lit fiber-optic cables in front of dark clouds and a thunderstrike.

Image source: Getty Images, edited by the author.

Now what

One analyst report isn't necessarily the gospel truth, of course. We'll know more next week, as Applied Optoelectronics is set to report fourth-quarter results on Feb. 22. Until then, I'd note that the stock is trading at just 7.1 times trailing earnings. It's easy to imagine a strong bounce for this troubled stock if -- if -- Applied Optoelectronics can prove the doubters wrong.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Facebook. The Motley Fool has the following options: short March 2018 $200 calls on Facebook and long March 2018 $170 puts on Facebook. The Motley Fool has a disclosure policy.