Roth Capital Boosts Price Target for Applied Optoelectronics Inc (AAOI) Following Positive Earnings Pre-Announcement


Applied Optoelectronics Inc (NASDAQ:AAOI) reported preliminary second-quarter results before the market open Thursday, beating its guidance on both revenue and EPS. In reaction, Roth Capital analyst Brian Alger reiterated a Buy rating on the stock, while raising his price target to $90 (from $70), which implies an upside of 7% from current levels.

Alger commented, “Thursday’s press release didn’t provide much detail as to where the specific strength came from, however we assume most of the upside came from datacenter, which continues to see tremendous potential for the company. While we are pleased to see the revenue upside, we are more impressed by the GM improvement to 45% from 43.2% in the March quarter and 31.4% a year ago.”

“While we still expect margins to contract in 2H:17 and FY:18, the significantly higher starting point and the higher revenue level result in a model demonstrating much better leverage and EPS growth than before. As such we are raising our target multiple from 15x FY:18 EPS to ~17x,” the analyst added.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Alger has a yearly average return of 32.1% and a 62% success rate. Alger has a 214.5% average return when recommending AAOI, and is ranked #104 out of 4600 analysts.

Out of the 9 analysts polled (in the past 3 months), 7 rate Applied Optoelectronics stock a Buy, 1 rates the stock a Hold and 1 recommends to Sell. With a downside potential of nearly 4%, the stock’s consensus target price stands at $80.38.