Raymond James cuts AAOI stock target to $31, keeps Outperform
Investing.com
Published Feb 27, 2025 06:07AM ET
On Thursday, Raymond James made a revision to the price target for Applied Optoelectronics (NASDAQ:AAOI), a $1.24 billion market cap company, adjusting it downward to $31.00 from the previous $36.00, while retaining an Outperform rating on the stock. According to InvestingPro data, analyst targets currently range from $14 to $44, reflecting the stock's notable volatility. The adjustment follows the company's fourth-quarter report for the fiscal year 2024, which presented a set of mixed financial results.
Applied Optoelectronics, a provider of fiber-optic networking products with trailing twelve-month revenue of $209.55 million, reported that its datacenter unit's performance did not meet investor expectations, despite the company's strong sales in the CATV (Cable Television) segment. The analyst from Raymond James acknowledged the mixed outcome but emphasized the promising future outlook for the company, citing the potential in the 800G and 1.6T markets. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with 10+ additional exclusive insights available to subscribers.
The company's capital expenditures are set to increase significantly due to the need to support new deals, which introduces a higher degree of execution risk. With a beta of 2.35, the stock's historically high volatility adds another layer of consideration. This anticipated rise in spending is a gamble on the company's part, as it seeks to capitalize on forthcoming opportunities. Get deeper insights into AAOI's financial health and growth prospects with InvestingPro 's comprehensive research report, one of 1,400+ available for US stocks.
Raymond James anticipates that the stock will continue to experience volatility, driven by investor debates over the company's ability to seize market opportunities and successfully execute its business strategies. Despite concerns over the company's quality, the firm views Applied Optoelectronics as one of the companies within its sector that is most likely to see upward revisions in estimates.
The analyst highlighted that Applied Optoelectronics counts major industry players as key customers, including Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Oracle (NYSE:ORCL) for its Datacenter business, and Charter for its cable segment. These relationships with significant customers underscore the company's role in the tech and communications sectors.
In other recent news, Applied Optoelectronics, Inc. reported its financial results for the fourth quarter of 2024, aligning with analyst expectations. The company posted a non-GAAP loss per share of $0.02 and revenue of $100.3 million, marking a 66% increase in revenue compared to the previous year. This performance was driven by strong demand in the data center and CATV markets. Applied Optoelectronics is expanding its capacity for high-demand transceivers, projecting significant capital investments of $120 million to $150 million in 2025 to meet anticipated demand. The company plans to produce 800G and 1.6T transceivers, expecting to fulfill demand of 200,000 to 250,000 units per month by the end of 2025. Strategic investments are underway, marking the largest capital expansion in the company's history, with a focus on production in the United States. In a subtle nod to analyst feedback, the company is seen as poised for growth, with ongoing discussions for potential strategic investments. These developments reflect Applied Optoelectronics' strategic positioning and commitment to meeting future demand in the data center and CATV markets.
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Written By: Investing.com
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