Applied Optoelectronics (AAOI) has received a new Buy rating, initiated by Needham analyst, Ryan Koontz.
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Ryan Koontz has given his Buy rating due to a combination of factors that suggest significant growth potential for Applied Optoelectronics. The company is strategically positioned to capture a substantial share of the over $12 billion high-speed global optical datacom transceiver market. This opportunity arises as tariffs and geopolitical issues threaten the dominant position of Chinese transceiver vendors, who currently hold more than 50% of the market share. Consequently, Applied Optoelectronics, which currently holds about 1% of the market, is expected to rapidly increase its share by securing deals with major Cloud and AI companies.
Despite the risks associated with the company’s previous inconsistent execution, Koontz believes the potential market opportunities and the limited competition from Western companies make it an attractive investment. The price target of $32 is based on an enterprise value to sales multiple of 2.4x and a price-to-earnings multiple of 30x, reflecting both the potential upside and the moderate risk related to the timing of achieving ambitious revenue growth and gross margin expansion.
Based on the recent corporate insider activity of 71 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of AAOI in relation to earlier this year.