In a research report issued Thursday, D.A. Davidson analyst Mark Kelleher initiated coverage on shares of Applied Optoelectronics Inc (NASDAQ:AAOI), with a Buy rating and $95 price target, which implies an upside of 52% from current levels.

Kelleher explained, “The company is well positioned to benefit from the growing dominance of ‘hyperscale’ data centers from customers such as Amazon (AMZN) and Microsoft (MSFT). As these data centers grow larger, the need for small form-factor transceivers that deploy CWDM technology increases, creating a favorable margin mix shift environment for the company. In addition, cable providers continue to deploy optical infrastructure to service the growing bandwidth needs of its home customer base. We expect this market to also drive solid top line growth for the company.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Kelleher has a yearly average return of 6.2% and a 55% success rate. Kelleher is ranked #1262 out of 4600 analysts.

Out of the 9 analysts polled by TipRanks (in the past 12 months), 7 rate Applied Optoelectronics stock a Buy, 1 rates the stock a Hold and 1 recommends a Sell. With a return potential of 19%, the stock’s consensus target price stands at $74.63.