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Applied Optoelectronics (AAOI)
NASDAQ:AAOI
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Applied Optoelectronics
(NASDAQ:AAOI)
Rating:48Neutral
Price Target:
$20.00
▲( 11.86% Upside)
Positive Factors
Customer diversification
Oracle was a new 10% customer, indicating potential for diversified revenue streams.
Stable revenue
With Microsoft as the top customer, the company could sustain quarterly revenue of around $100M even if CATV slows down.
Negative Factors
Market 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 concerns
CATV strength may not be sustainable, raising concerns about future revenue sources.
Applied Optoelectronics (AAOI) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$978.14M
Dividend YieldN/A
Average Volume (3M)3.71M
Price to Earnings (P/E)―
Beta (1Y)3.31
Revenue Growth50.30%
EPS Growth-111.11%
CountryUS
Employees3,309
SectorTechnology
Sector Strength77
IndustrySemiconductors
Share Statistics
EPS (TTM)-0.02
Shares Outstanding55,544,353
10 Day Avg. Volume4,900,765
30 Day Avg. Volume3,714,633
Financial Highlights & Ratios
PEG Ratio0.03
Price to Book (P/B)2.95
Price to Sales (P/S)0.00
P/FCF Ratio-7.20
Enterprise Value/Market Cap0.96
Enterprise Value/Revenue1.08
Enterprise Value/Gross Profit15.22
Enterprise Value/Ebitda-3.20
Forecast
1Y Price Target
$32.75Price Target Upside83.17% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering4
Applied Optoelectronics Business Overview & Revenue Model
Company DescriptionApplied Optoelectronics, Inc. designs, manufactures, and sells various fiber-optic networking products worldwide. It offers optical modules, lasers, subassemblies, transmitters and transceivers, and turn-key equipment, as well as headend, node, and distribution equipment. The company sells its products to internet data center operators, cable television and telecom equipment manufacturers, and internet service providers through its direct and indirect sales channels. Applied Optoelectronics, Inc. was incorporated in 1997 and is headquartered in Sugar Land, Texas.
How the Company Makes MoneyApplied 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.45
Neutral
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.50
Neutral
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.40
Negative
| 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 |
| 190.86M | 121.07M | 150.02M | 142.65M | 154.92M | Net Debt |
| 123.43M | 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
Neutral
17.88
Price Trends
15.60
Positive
21.23
Negative
21.02
Negative
Market Momentum
1.06
Negative
56.96
Neutral
37.45
Neutral
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 17.88 is above the 20-day moving average (MA) of 16.30, above the 50-day MA of 15.60, and below the 200-day MA of 21.02, indicating a neutral trend. The MACD of 1.06 indicates Negative momentum. The RSI at 56.96 is Neutral, neither overbought nor oversold. The STOCH value of 37.45 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for AAOI.
Applied Optoelectronics Risk Analysis
Applied Optoelectronics disclosed 37 risk factors in its most recent earnings report. Applied Optoelectronics reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 1 New Risks
1.
The parties may be unable to satisfy the conditions to the closing of our divestiture and the transaction may not be consummated, and the failure of the divestiture to be completed may adversely affect our business and our common stock price. Q3, 2022
Applied Optoelectronics Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $599.87M | 5.68 | 37.53% | ― | 1.99% | 375.37% | |
68 Neutral | $1.11B | ― | -15.78% | ― | 6.26% | -9.54% | |
61 Neutral | $859.48M | 36.73 | 4.78% | ― | -6.97% | ― | |
61 Neutral | $11.29B | 10.07 | -7.05% | 2.96% | 7.47% | -10.75% | |
58 Neutral | $643.69M | ― | -66.95% | ― | -10.18% | 75.30% | |
52 Neutral | $570.83M | ― | -2.35% | ― | 13.41% | 72.56% | |
48 Neutral | $978.14M | ― | -68.45% | ― | 50.30% | -111.11% |
* Technology Sector Average
Performance Comparison
AAOI
Applied Optoelectronics
17.88
5.34
42.58%
ADTN
Adtran
7.80
2.53
48.01%
DJCO
Daily Journal
417.27
24.17
6.15%
NTGR
Netgear
28.80
15.42
115.25%
ICHR
Ichor Holdings
16.41
-22.33
-57.64%
FSLY
Fastly
7.19
-1.29
-15.21%
Applied Optoelectronics Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: 21.14%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong performance with record CATV revenue, improvements in gross margin, and promising progress in the data center business. However, there are challenges, including a sequential decline in data center revenue and a notable increase in inventory. The company is actively expanding its production capacity and remains optimistic about long-term growth trends.Q1-2025 Updates
Positive Updates
Record-Breaking CATV Revenue
Achieved the highest quarterly CATV revenue in AOI's history at $64 million, which increased more than 6 times year-over-year and 24% sequentially.
Data Center Business Progress
Secured three new design wins with existing hyperscale data center customers. Revenue from data center products was $32 million, up 11% year-over-year.
Non-GAAP Gross Margin Improvement
Non-GAAP gross margin improved to 30.7%, above the guidance range, and up from 18.9% in Q1 of 2024.
Expansion in Manufacturing Capacity
Plans to expand production capacity for 800G and 1.6 terabit transceivers in Texas, aiming for 100,000 pieces per month by the end of the year.
Positive Long-Term Growth Trends
Strong long-term demand expected in CATV and data center markets, with significant opportunities in 800G products.
Negative Updates
Sequential Decline in Data Center Revenue
Data center revenue of $32 million was down 28% sequentially due to inventory digestion from a major customer.
Non-GAAP Operating Loss
Non-GAAP operating loss in Q1 was $4.8 million, though this was an improvement from the prior year.
Inventory Increase
Inventory increased to $102.3 million from $88.1 million in Q4, mainly for raw materials for CATV and data center products.
Potential Tariff Impact
While tariffs had no material impact in Q1, there is ongoing monitoring and potential risk for future quarters.
Company Guidance
During the first quarter of 2025, Applied Optoelectronics (AOI) reported a revenue of $99.9 million, which was within their guidance range of $94 million to $104 million. The company achieved a non-GAAP gross margin of 30.7%, surpassing the guidance range of 29% to 30.5%. The non-GAAP loss per share was $0.02, aligning with the guidance range of a loss of $0.07 to break even. The CATV segment generated $64 million in revenue, marking a year-over-year increase of more than six times, while the data center products revenue was $32 million, up 11% year-over-year but down 28% sequentially. Looking ahead to Q2 2025, AOI anticipates revenue between $100 million and $110 million, with a non-GAAP gross margin between 29.5% and 31%, and a non-GAAP net income loss ranging from $4.8 million to $1.7 million.Applied Optoelectronics Corporate Events
Private Placements and FinancingBusiness Operations and Strategy
Applied Optoelectronics Financial Strategy and Stock Issuance
Positive
Dec 23, 2024
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.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.