Applied Optoelectronics (AAOI) AI Stock Analysis

• Market Cap: $816.61M
• Dividend Yield: N/A
• Average Volume (3M): 3.56M
• Price to Earnings (P/E): ―
• Beta (1Y): 3.20
• Revenue Growth: 14.57%
• EPS Growth: -139.27%
• Country: US
• Employees: 3,309
• Sector: Technology
• Sector Strength: 65
• Industry: Semiconductors
• EPS (TTM): -4.29
• Shares Outstanding: 55,514,060
• 10 Day Avg. Volume: 2,688,076
• 30 Day Avg. Volume: 3,560,928
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 2.22
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 29.28
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $33.25
• Price Target Upside: 126.04% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 4

Applied Optoelectronics struggles with profitability and cash flow issues despite revenue growth. The technical analysis indicates a bearish trend, while the valuation reflects concerns due to ongoing losses. These factors collectively contribute to a lower score, highlighting significant operational and financial challenges the company must address to improve its stock performance.

Positive Factors

Customer Base

Oracle was a new 10% customer, indicating potential for diversified revenue streams.

Revenue Sustainability

With Microsoft as the top customer, the company could sustain quarterly revenue of around $100M even if CATV slows down.

Negative Factors

Industry Transition

400G demand may start to decay as the industry transitions from Hopper to Blackwell, impacting future growth.

Product Qualification

Management expects 800G to ramp up, but it hasn't been qualified by any hyperscalers yet, which poses uncertainty.

Revenue Sources

CATV strength may not be sustainable, raising concerns about future revenue sources.

Applied Optoelectronics Business Overview & Revenue Model

Company Description

Applied Optoelectronics, Inc. (AAOI) is a leading provider of fiber-optic networking products. The company operates primarily in the telecommunications, datacenter, and cable television broadband sectors. It specializes in the design and manufacture of advanced optical components, including laser chips, modules, and subsystems, which enable high-speed data transmission over fiber optic networks.

How the Company Makes Money

Applied Optoelectronics generates revenue through the sale of its fiber-optic networking products and solutions. Key revenue streams include the sale of laser chips, optical transceivers, and other optical modules to customers in the telecommunications and datacenter industries. The company also earns income from providing integrated solutions that enhance network performance and connectivity. Strategic partnerships with major technology companies and service providers, along with investments in research and development, contribute significantly to its earnings by facilitating innovation and meeting the evolving demands of high-speed data transmission.

Applied Optoelectronics Financial Statement Overview

Summary

Applied Optoelectronics demonstrates revenue growth but faces ongoing profitability and cash flow challenges. While the balance sheet shows some stability and improved liquidity, high net losses and negative cash flow metrics highlight operational inefficiencies and financial risks that need addressing to enhance long-term sustainability.

Income Statement

The company's income statement reveals consistent revenue growth, with a 14.57% increase in 2024 compared to 2023. However, profitability remains an issue, as evidenced by persistent negative EBIT and net income, indicating ongoing operational challenges. The gross profit margin improved to 24.78%, but the net profit margin deteriorated to -74.89%, showing increased losses.

Balance Sheet

The balance sheet shows a stable equity base, with stockholders' equity increasing to $229.1 million. The debt-to-equity ratio rose to 0.75, slightly increasing leverage but remaining manageable. The equity ratio decreased to 41.88%, indicating moderate reliance on debt financing. Improved cash reserves enhance liquidity, but financial stability is still a concern due to significant liabilities.

Cash Flow

Cash flow analysis highlights a negative free cash flow, worsening to -$112.9 million, indicating substantial cash outflows. The operating cash flow to net income ratio is negative, reflecting inefficiencies in generating cash from operations. Despite increases in financing cash flow, overall cash management remains a challenge, impacting financial flexibility.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
249.37M	217.65M	222.82M	211.56M	234.62M
	Gross Profit
61.80M	58.92M	33.63M	37.72M	50.54M
	EBIT
-70.91M	-41.35M	-59.00M	-56.77M	-46.13M
	EBITDA
-159.26M	-26.18M	-36.88M	-23.17M	-20.86M
	Net Income Common Stockholders
-186.73M	-56.05M	-66.40M	-54.16M	-58.45M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
67.43M	45.37M	35.59M	41.14M	43.42M
	Total Assets
547.03M	389.19M	408.26M	454.46M	480.81M
	Total Debt
171.60M	121.07M	150.02M	142.65M	154.92M
	Net Debt
104.17M	75.71M	114.43M	101.51M	111.50M
	Total Liabilities
317.92M	174.32M	223.59M	199.89M	202.91M
	Stockholders Equity
229.11M	214.87M	184.67M	254.57M	277.89M
Cash Flow		Free Cash Flow
-112.93M	-17.60M	-18.26M	-22.30M	-63.57M
	Operating Cash Flow
-69.53M	-7.93M	-14.02M	-11.64M	-44.01M
	Investing Cash Flow
-50.70M	-14.76M	-3.83M	-10.55M	-19.35M
	Financing Cash Flow
142.18M	40.58M	10.75M	14.09M	47.44M

Applied Optoelectronics Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 14.71
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AAOI, the sentiment is Neutral. The current price of 14.71 is above the 20-day moving average (MA) of 11.88, below the 50-day MA of 16.63, and below the 200-day MA of 20.38, indicating a neutral trend. The MACD of -1.04 indicates Negative momentum. The RSI at 53.31 is Neutral, neither overbought nor oversold. The STOCH value of 85.59 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for AAOI.

Applied Optoelectronics Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DJCO	70 Neutral	$520.71M	6.81	30.39%	―	0.34%	370.41%
NTGR	61 Neutral	$805.89M	72.07	2.30%	―	-8.65%	―
Sector *	59 Neutral	$10.75B	10.37	-6.64%	3.00%	7.30%	-12.02%
FSLY	51 Neutral	$831.95M	―	-16.25%	―	7.45%	-10.76%
ICHR	50 Neutral	$675.78M	―	-3.30%	―	4.68%	55.72%
ADTN	45 Neutral	$612.51M	―	-123.20%	―	-19.70%	-70.40%
AAOI	41 Neutral	$816.61M	―	-84.12%	―	14.57%	-139.27%

Applied Optoelectronics Corporate Events

Applied Optoelectronics Financial Strategy and Stock Issuance

Applied Optoelectronics announced the closure of an exchange agreement, swapping $76.7 million in 2026 Notes for $125 million in 2030 Notes, 1.487 million shares of common stock, and a cash amount covering accrued interest. This move is part of a broader financial strategy to extend the company’s debt maturity and improve financial flexibility by eliminating restrictive covenants from the 2026 Notes. Concurrently, the company conducted a registered direct offering, issuing 1.036 million shares to raise approximately $33.7 million, which will be used for general corporate purposes and potentially future acquisitions. These transactions are expected to reduce interest expenses and bolster the company’s cash position, with minimal additional shareholder dilution.